Tom Horton: He would have received $19.875 million, half in cash and half in stock, as part of the merger plan
The judge in American Airlines' bankruptcy case gave details Thursday on why he rejected CEO Tom Horton's $20 million severance package, but didn't say when the company should address a payout.
The comments come two weeks after a March 27 hearing at which U.S. Bankruptcy Judge Sean Lane of New York approved the merger proposal between American Airlines and US Airways but struck down its compensation package for Horton, without offering an explanation.
As part of the merger deal, Horton would have received $19.875 million, half in cash and half in stock, as he steps aside for US Airways CEO Doug Parker, who will run the new company.
Now, the terms of any severance are unclear.
U.S. Trustee Tracy Hope Davis had contested Horton's compensation package, saying is was illegal under a 2005 law that curbs excessive payouts for company insiders.
Lane agreed, countering American Airlines' claim that the payout to Horton would come from an entirely new company formed by the merger of American Airlines and US Airways.
"It is clear that the severance payment relates to Mr. Horton's employment at AMR, where he currently serves as CEO, not from the (new combined company), which does not yet exist and where Mr. Horton will take on a new position only after the merger is finalized and the proposed severance is paid," Lane wrote in comments released Thursday afternoon.
Horton has served as CEO since AMR Corp., American's parent company, filed bankruptcy in November 2011. The bankruptcy has meant cuts at American Airlines, including those affecting the airline's 6,500 employees in Tulsa.
But the $20 million severance package was thought to be one of the final points in getting Horton to agree to a merger with US Airways. Horton opposed the deal publicly for more than a year, saying the company should emerge from bankruptcy before submitting to a merger.
Lane didn't say how or when American Airlines and US Airways should address Horton's severance, only that it was clearly illegal under the merger plan.
He did say that the new combined company could make the payment.
"But that suggestion only highlights the fact that, once created, (the new company) can make a severance payment to Mr. Horton without any approval from this Court," Lane wrote.
American Airlines officials did not comment on the court documents and have not said the company has considered changing the severance offer.
American Airlines could submit the severance as part of their reorganization plan due at the end of May, but it's still unclear whether Lane would allow it then, either.
Kyle Arnold 918-581-8380
kyle.arnold@tulsaworld.com
Original Print Headline: Judge: Hefty payout illegal
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The American Airlines bankruptcy judge issued a written opinion Friday stating that he took the financial sacrifices made by union members into account when rejecting a $20 million severance deal for CEO Tom Horton.
