Chief executive Tom Horton will be stepping down -- but will enjoy a $19.9 million severance package.
American Airlines' bankrupt parent, AMR, is soon to merge with U.S. Airways. AMR declared bankruptcy in 2011, and agreed to the plan in February. Once the merger is complete, the carrier's CEO Tom Horton will be leaving his post to enjoy a final pay packet that many object to.
In papers filed Thursday in Manhattan's Bankruptcy Court, AMR said that the pay-off does not violate bankruptcy laws and would not impact the company's creditors. According to an American Airlines spokesman, "AMR's creditors and shareholders voted overwhelmingly" to accept the terms of the merger, and this includes the severance package of the CEO.
However, this is not an opinion shared by all. The U.S. Department of Justice (DOJ)'s bankruptcy regulators, the U.S. Trustee Program, has challenged the payment. The DOJ says that bankruptcy laws prevent severance pay larger than 10 times the average package offered to employees, and therefore the $19.9 million figure is illegal.
A hearing will take place on August 15.
This post was originally published on Smartplanet.com