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The US Airways American Airlines merger took another step forward yesterday when federal bankruptcy judge Sean Lane officially approved the $11 billion deal, calling it an “excellent result” – though that remains to be seen.

The American-US Airways merger moved one step closer yesterday with federal approval.
The American-US Airways merger moved one step closer yesterday with federal approval.

American Airlines has been in bankruptcy since November 2011, while the official announcement of the merger with US Airways came out just last month. Don’t expect things to move quickly just yet, though, since this is a single step in a long sequence and American now has until May 29 to file its reorganization plan.. In addition to the approval of a federal bankruptcy judge, American’s creditors must also approve the merger, and though it’s unlikely for that not to happen, it will still take a while.

Then the court will have to review the plans again including American’s bankruptcy restructuring plan, and that’s likely to be six months from now.

One aspect of the hearing that did not go so smoothly? American CEO Tom Horton’s prospective $19.9 million severance package, comprised of half cash and half stock, which Judge Lane denied. Don’t shed a tear for Horton just yet since he can sneak it into the merger bankruptcy plan that the court reviews six months from now before US Airways CEO Doug Parker takes over the whole company – especially since Lane seemed to object to the timing rather than the amount of the severance.

This just keeps him on board until then and he’ll probably step down within a year of the merger being finally approved. Besides, Horton only became of American after the company had filed for bankruptcy in November 2011, so that’s a pretty hefty payday for someone who’s only been at the company less than 18 months. No wonder the government trustee in the AMR bankruptcy case, Tracy Hope Davis, called it excessive. I can only imagine how the unions feel about it since they’ve taken deep cuts over the past couple years.

That snafu shouldn’t hold up the merger according to American’s creditors, so it looks like we’ve just witnessed the next box being checked in a merger that will create the world’s new largest airline – which is projected to operate nearly 7,000 daily flights with an annual revenue close to $40 billion.

So it looks like the merger is developing according to plan and should close by fall 2013. What are your thoughts? Should Horton get a $20 million payday for overseeing the end of a legacy airline?

For more information, check out these posts:

Official American US Airways Merger Announcement and What It Means For Consumers

How To Prepare for a US Airways American Airlines Merger

Maximizing a Potential US Airways American Airlines Merger

The Potential Winners and Losers of an American Airlines US Airways Merger

American Chooses Citi As Post-Merger Credit Card Partner

Top 10 Reasons I Don’t Want a US Airways American Merger To Go Through

US Justice Department Suing to Block American US Airways Merger

DOJ Settles With American: Merger Moves One Step Closer to Approval

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