Judge approves American-US Airways merger

NEW YORK — A federal bankruptcy judge signed off Wednesday on the $11 billion merger of American Airlines and US Airways.

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

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


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

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Lane’s decision was complicated by objections to the timing of a $20 million severance package for outgoing American chief executive Tom Horton. Horton has agreed to step down as CEO and leave the company within a year of the merger’s closing. The US trustee objected to Horton’s severance, saying it is in excess of limits set under the bankruptcy code.

Lane decided not to approve that payment as part of his decision and plans to issue a written decision at a later date detailing his reasoning.

Horton spent nearly his entire career at American, becoming CEO when the company filed for bankruptcy on Nov. 29, 2011. Once the deal closes, US Airways chief Doug Parker will run the combined airline. Horton will step down as CEO and then leave the board within a year. The deal calls for him to receive $19.9 million in cash and stock as well as lifetime free first-class tickets on American for himself and his wife.

‘‘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.