AMR Files Bankruptcy Exit Plan
AMR, the parent company of American Airlines, on Monday filed formal plans to exit bankruptcy, bringing its proposed USD$11 billion merger with US Airways closer to reality.
The reorganisation plan, which details some executive compensation and outlines measures for creditors and shareholders, is a necessary step before the two companies can come together to create the world's largest airline. The plan requires both court and creditor approval.
Under the plan, AMR's outgoing chief executive, Tom Horton, would receive a USD$19.9 million severance package.
US Bankruptcy Judge Sean Lane declined to approve the same severance proposal earlier this month, ruling that it was not permitted under federal bankruptcy law, but suggested it be included in AMR's reorganisation plan, making it subject to creditor approval.
Secured creditors would be paid in full, while unsecured creditors would receive shares of preferred stock.
As expected, AMR shareholders would receive a 3.5 percent equity stake in the new company, which would make it one of the few major bankruptcies in which equity holders earn some recovery. An attorney for AMR's creditors committee has said the stake could be valued at between USD$350 million and USD$400 million.
US Airways chief executive Doug Parker would serve as CEO of the new airline. He would receive USD$19.5 million if he loses the job during the merger, the companies said in a separate filing on Monday.
Parker was paid about USD$5.5 million last year, up from USD$3.8 million in 2011. While his base salary stayed the same at USD$550,000, his incentive compensation rose nearly fivefold as US Airways met financial goals.
AMR is the last major US carrier to go through bankruptcy, after its competitors all underwent restructurings in the last decade.
The company's initial opposition to a merger faded under pressure from its creditors' committee, and Parker aggressively wooed AMR by appealing to its unions, striking a tentative deal with the airline's workers before formal talks between the two companies had begun in earnest.
The merger was approved by a bankruptcy judge last month but still requires regulatory approval.
The combined carrier would keep the American name and be based in AMR's hometown of Fort Worth, Texas. The merger is expected to close in the third quarter.