NEW YORK – AMR Corp, the parent company of American Airlines, filed formal plans to exit bankruptcy on Monday, bringing its proposed $11 billion merger with US Airways Group closer to reality.
The reorganization 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 $19.9 million severance package.
U.S. 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 reorganization 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 $350 million and $400 million.
US Airways Chief Executive Doug Parker would serve as CEO of the new airline. He would receive $19.5 million if he loses the job during the merger, the companies said in a separate filing on Monday.
Parker was paid about $5.5 million last year, up from $3.8 million in 2011. While his base salary stayed the same at $550,000, his incentive compensation rose nearly fivefold as US Airways met financial goals.
AMR is the last major U.S. 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 would be based in AMR's hometown of Fort Worth, Texas. The merger is expected to close in the third quarter.
The case is In re: AMR Corp et al, U.S. Bankruptcy Court, Southern District of New York, No. 11-15463.
(Reporting by Joseph Ax; Additional reporting by Nick Brown and Karen Jacobs; Editing by Edwina Gibbs)