A merger to create world’s biggest airline has taken another step toward becoming reality, but the outgoing CEO of one airline could be out of luck.
On Wednesday, a U.S. Bankruptcy Court judge approved the proposed merger of bankrupt AMR‘s (PINK:AAMRQ) American Airlines with U.S. Airways (NYSE:LCC), but declined to approve a $20 million compensation package for AMR’s CEO Tom Horton. The judge found that the package’s timing was inconsistent with bankruptcy rules, the Associated Press noted.
Under the merger agreement, U.S. Airway’s CEO Doug Parker will become head of the combined company, while Horton will depart the company a year after the merger is completed. Horton’s severance package included unlimited free first class tickets on the merged airline’s flights for Horton and his wife. Attorneys for American Airlines said that the deal could be restructured so that Horton’s compensation package will be voted on by the company’s board after the merger.
American has been operating under Chapter 11 bankruptcy protection since November 2011. The two airlines announced plans to combine operations in February.
Federal regulators and U.S. Airways shareholders still have to approve the merger, which is expected to be finalized in the third quarter of this year.
Shares of AMR surged almost 5% in over-the-counter trading on Thursday, while U.S. Airways shares gained almost 2%.