Judge approves American-US Air deal


 The $11 billion merger of American Airlines and US Airways won bankruptcy court approval Wednesday.

The widely-expected decision by Judge Sean H. Lane helps clear the way for the two carriers form the world’s biggest airline, with 6,700 daily flights and annual revenue of roughly $40 billion.

The merger, first announced on Feb. 14, still needs approval from antitrust regulators and US Airways shareholders. It is expected to close by the fall.

“The merger is an excellent result. I don’t think anybody disputes that,” Lane said during a court hearing. American has been in bankruptcy protection since November 2011.

Lane decided not to approve a $20 million severance package for outgoing American CEO Tom Horton. He plans to issue a written decision at a later date detailing his reasoning.

The companies have proposed paying Horton $20 million in severance. Horton has agreed to step down as CEO and leave the company within a year of the merger’s closing. The U.S. trustee objected to Horton’s severance, saying it is in excess of limits set under the bankruptcy code.

American tried to get Lane to approve the severance as part of a larger motion to approve the merger. The U.S. trustee accused the airline of trying “to misuse their motion to approve the merger to make an end run around” limits included in the bankruptcy code. American denied that.

“This was not something decided upon to line the pockets” of American’s executives, said Stephen Karotkin, a lawyer with Weil, Gotshal & Manges, which represents American.

Lane didn’t object to the actual severance payment but agreed with the trustee that the timing of it seemed to violate prohibitions in the bankruptcy law.

“I am bound by the way Congress drafted the statute,” Lane said, adding that he was worried about setting a bad precedent that lawyers in future cases will try to capitalize upon.

“There are many, many smart lawyers out there,” Lane added. “It’s not hard to imagine.”


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