The CEO of AMR Corp., parent company of bankrupt American Airlines, won't be getting a $20 million severance package from the company. A bankruptcy court judge in New York rejected the payment, citing restrictions on payments to insiders as part of corporate restructuring.
The severance package for CEO Tim Horton was opposed by a federal bankruptcy trustee. AMR argued that the pay would be made after the reorganization and would consist of half cash and half stock in a new company formed from AMR's merger with US Airways Group Inc. (NYSE: LCC).
The court rejected AMR's argument because the company was asking to make the payment some six months before the merger occurs. The judge did say that if the merged company wants to make the payment after the merger is complete it may do do. This is the same judge who gave his approval to the merger between the two airlines.
As part of the merger with US Air, Horton will remain with the merged company as non-executive chairman of the board until next spring.
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