The U.S. Trustee in AMR Corp.'s Chapter 11 bankruptcy case has objected to CEO Tom Horton's $19.8 million severance payment, arguing that the company hasn't explained "why the sweeping changes to their various employee compensation programs are permissible" under federal bankruptcy rules.
According to the filing, made Friday in U.S. Bankruptcy Court in New York where AMR's case is being heard, the company has stated that it doesn't have to address the payment because the newly reorganized company will make the payment, not the current AMR.
But Trustee Tracy Hope Davis said it's not who makes the payment that is the important factor, but whether the payment conforms to restrictions placed on compensation arrangements by the U.S. Bankruptcy Code.
In the filing, Davis said "severance payment of close to $20 million defeats Congress’ intent" when it put restrictions on such compensation.
Late Friday, AMR spokesman Andrew Backover issued the following statement:
“American does not believe the objection filed by the Office of United States Trustee has merit, and we believe the relief requested in our motion is appropriate and should be granted by the Bankruptcy Court.
“The employee arrangements included in the merger agreement are structured to reasonably and appropriately compensate our employees as well as to align them with their counterparts at US Airways with the goal of moving toward market levels over the next few years. The employee arrangements were deemed reasonable and appropriate by compensation consultants retained by the Unsecured Creditors’ Committee and are in line with industry precedents and the relief requested in the motion is supported by the Unsecured Creditors’ Committee and the Ad Hoc Committee of Bondholders.
“The relief requested will appropriately motivate a strong management team during the integration process to ensure the value potential of the merger is realized and the new American is a success for all of its constituents.”
Also Friday, unions representing pilots for American Airlines and US Airways filed motions in support of the merger.-- Jim Fuquay