American Airlines’ proposal for severance pay of $20 million to Chief Executive Officer Tom Horton as part of the carrier’s merger with US Airways Group Inc. (LCC) is opposed by the U.S.
The payment violates bankruptcy law, the U.S. Trustee’s office, a part of the Justice Department that monitors bankruptcy proceedings, said yesterday in a court filing in New York.
American parent AMR Corp. (AAMRQ) has sought court approval of the severance under its plan to exit court protection by merging with US Airways. U.S. Bankruptcy Judge Sean Lane in Manhattan denied approval of the pay when he approved the merger agreement in March.
The government said in its filing that severance provision for Horton prevents court approval of the bankruptcy plan. Lane is scheduled to consider at a June 4 hearing whether creditors can vote on the plan.
Sean Collins, a spokesman for Fort Worth, Texas-based AMR, said in an e-mailed statement that the company didn’t expect creditor voting to be delayed. He didn’t respond specifically to the government’s opposition to the proposed severance.
The case is in re AMR Corp., 11-15463, U.S. Bankruptcy Court, Southern District of New York (Manhattan).