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Judge questions timing of American Airlines CEO's severance payout

March 27, 2013|By Hugo Martin
  • American Airlines Chief Executive Tom Horton, seen in 2011, is in line to receive a severance package worth nearly $20 million after American's pending merger with US Airways is complete.
American Airlines Chief Executive Tom Horton, seen in 2011, is in line to… (Richard W. Rodriguez / Associated…)

A judge overseeing the bankruptcy of American Airlines' parent company questioned the timing Wednesday of a proposed severance package for the carrier's chief executive.

AMR Corp. has requested approval from the judge to merge with US Airways and then exit bankruptcy later this year.

Under the deal, US Airways Chief Executive Doug Parker would become the new airline's top executive while American Airlines CEO Tom Horton would become chairman of the board.

AMR submitted a request to U.S. Bankruptcy Court Judge Sean Lane to pay Horton a severance package of nearly $20 million after the merger is completed.

The U.S. trustee in the case has objected to the payout, saying it violates bankruptcy law.

On Wednesday, Lane suggested the payout shouldn't be considered as part of the merger plan and should instead be discussed later, perhaps as part of AMR's bankruptcy reorganization plan, according to the Associated Press.

“Why can’t it and why shouldn’t it be in the plan as opposed to here?” the judge said of the payout.

AMR officials have defended the package, saying it would be paid after the new airline is formed.

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Follow Hugo Martin on Twitter at @hugomartin

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