American Airlines' plan to emerge from bankruptcy won the approval of a federal bankruptcy judge Thursday, though an antitrust lawsuit from the Justice Department could still derail the agreement.
Judge Sean Lane gave his formal approval to American Airlines' and parent company AMR Corp.'s plan to emerge from bankruptcy and entirely repay its creditors using stock created through the merger with US Airways and the formation of a new company.
American Airlines and AMR Corp. CEO Tom Horton also agreed to drop his $20 million severance agreement that was part of the merger, after Lane said it should not be in the reorganization plan.
"The judge's ruling today shows that American is heading in the right direction," said American Airlines spokesman Mike Trevino. "We are focused on the antitrust case and will show that our planned merger with US Airways is good for consumers and competition."
The company won't be able to implement the plan until it gains regulatory clearance. The trial in that case is scheduled to begin Nov. 25.
Lane said that American would be forced to create an entirely new plan if the merger with US Airways isn't allowed to proceed.
AMR Corp. has been working on the reorganization plan since Nov. 29, 2011, when it filed for bankruptcy protection. In the coming months it forced new contracts on pilots, flight attendants and maintenance workers that froze pensions.
The announcement Thursday could mark an important step for some 6,300 American Airlines employees in Tulsa, who have taken painful cuts through negotiations and lost hundreds of co-workers to restructuring.
TWU Local 514 president Dale Danker said it was a good sign to American Airlines maintenance workers who have been stressed with nearly two years of uncertainty because of the bankruptcy and now the antitrust lawsuit.
"We believe that this is heading into the right direction," Danker said.
American Airlines once threatened to cut more than 2,000 jobs from the Tulsa maintenance and engineering base. American Airlines is one of the largest employers in Tulsa with a combination of well-paying, blue collar jobs in the region.
American Airlines managed to trim the number of layoffs to just a few dozen through early retirements and voluntary layoffs, as well as a renegotiated contract with union members.
Danker also said union members will be pleased with Horton's plan to drop his request for a $20 million severance plan, a further point of contention among rank-and-file employees as they faced layoffs and cuts to their retirement pensions.
Lane had previously indicated that the court had no place approving Horton's severance plan as part of the merger agreement after hearing arguments that it violated federal bankruptcy law that prohibited excessively large payouts to insiders and executives.
American Airlines finally agreed to remove the severance provision Thursday, clearing one of the final objections to the plan.
The merger plan calls for the creation of an entirely new company, American Airlines Group Inc., that could employ as many as 100,000 people and be worth about $10.5 billion.
American Airlines creditors, union members and shareholders will own about 72 percent of the new company, and US Airways shareholders would own the balance.
TWU union members negotiated a 4.3 percent raise as part of the merger, but that raise doesn't kick in until the merger goes through. Maintenance workers and other employees are also in line for equity shares, but again, not until the merger is finalized.
"Today's announcement is long overdue," said Mike Neal, president and CEO of the Tulsa Regional Chamber. "The approved reorganization of American Airlines is a win for the Tulsa region and the state of Oklahoma. We remain hopeful the federal lawsuit hurdle will be soon resolved so the company can return to profitability and continued success within the new merger."
The bankruptcy case will continue in court until AMR Corp. settles other minor disputes with creditors.
Meanwhile American Airlines and US Airways will prepare their case in a Washington, D.C., court to prove to a judge that their merger doesn't violate federal antitrust law.
The Justice Department is arguing that the pairing of the airlines irreparably hurts competition in nearly every market where the two compete.
Antitrust regulators want to stop the merger entirely, saying that a decade of airline consolidation has taken too much competition out of the airline industry.
The airlines say the merger is necessary to create a viable third competitor to the industry leaders at United and Delta.
The Associated Press contributed to this story.
Kyle Arnold 918-581-8380
kyle.arnold@tulsaworld.com
Original Print Headline: Judge OKs AA bankruptcy plan
American Airlines
Some travelers will encounter the most tangible evidence of the reboot of American Airlines on Monday when the airline begins flying its first Airbus A319 jets.
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.
