American Airlines parent AMR Corp. won a bankruptcy judge's approval for its reorganization plan Thursday, but the U.S. Department of Justice's antitrust lawsuit against the airline's merger with US Airways has complicated the situation.
Lawyers are set to argue the antitrust trial in U.S. District Court in Washington, D.C., on Nov. 25. Until then, a handful of important questions will remain unanswered.
But Thursday's confirmation of AMR's bankruptcy plan did provide some answers.
How can Judge Sean Lane confirm AMR's bankruptcy plan if the Justice Department is fighting to block the merger with US Airways?
After 21 months of bankruptcy proceedings, lawyers for AMR were able to persuade Lane to approve the bankruptcy reorganization plan, even though it hinges entirely on the merger with US Airways. One of the conditions of American's agreement with US Airways is to get regulatory approval before the merger can take place.
"The Debtors shall have received any authorizations, consents, regulatory approvals, rulings, letters, no-action letters, opinions, or documents that are necessary to implement the Plan and are required by law, regulation, or order," the merger plan states.
Lane's approval puts American Airlines on course to emerge from bankruptcy as soon as the antitrust case is settled and the combination with US Airways goes through. But that assumes that the Justice Department isn't successful in blocking the merger entirely.
What happens if the Justice Department wins its antitrust lawsuit against the merger?
Essentially, American Airlines would have to start over and develop an entirely new bankruptcy reorganization plan - one that doesn't involve US Airways.
Lane agreed that he was able to approve the plan because if the merger is block by a federal judge on antitrust grounds, the merger can't take place.
A successful challenge from the Justice Department means American Airlines would have to come back with a new reorganization plan and the old plan would be thrown out.
But lawyers for the airlines say they are confident that the merger will go, either through a successful defense of the antitrust charges or through a settlement with federal officials. One scenario would have the merged partners giving up slots at airports where US Airways and American Airlines have dominant positions.
Lane indicated Thursday that he would have to review and approve any settlement terms in the antitrust lawsuit.
Judge Lane said AMR CEO Tom Horton's $20 million severance shouldn't be part of the plan. Will Horton still get his money?
It's too early to say that Tom Horton was entirely denied the controversial $20 million severance payment he was to receive as part of the merger.
Lane said it should not be part of the bankruptcy plan, after arguments that the severance violated federal laws that prohibit excessive payments to executives during reorganization.
Lane didn't officially block the severance because American Airlines lawyers agreed to withdraw it from the plan.
"Mr. Horton has consistently indicated his strong support for the Plan and the Merger," American Airlines said in a statement. "He also feels that any delay or uncertainty places a further burden on those who have worked so hard to achieve one of the most successful restructurings in aviation history."
Lane has indicated since March that a severance agreement for Horton would be better left up to the board of directors of the new, merged company, American Airlines Group Inc.
American Airlines Group isn't even a company yet, and now Horton is left without a written guarantee that he will get his severance.
Horton, however, is set to serve as chairman of the new company. US Airways CEO Doug Parker is slated to be the CEO.
Kyle Arnold 918-581-8380
kyle.arnold@tulsaworld.com
Original Print Headline: Approval of AMR plan provides answers
Transportation
As automakers race to make cheaper electric cars with greater battery range, General Motors is working on one that can go 200 miles per charge at a cost of about $30,000, a top company executive said Monday.
BNSF Railway Co. announced Monday it is spending $125 million to expand and improve its system in Oklahoma. Projects will include a new bypass connection at the Cherokee rail yard in west Tulsa and extending a siding area on the carrier's tracks near Mannford.
