US Airways: American set to file reorganization plan

Tail of an American Airlines 737-800 aircraft Scott Olson/Getty Images

DALLAS American Airlines is about to spell out its plan for emerging from bankruptcy protection after merging with US Airways (LCC).

US Airways, whose CEO will run the combined company, said in a message to employees that American was expected to file its reorganization plan later Monday in federal bankruptcy court in New York. American confirmed the report.

"With these materials filed, we are one step closer to completing the merger, which we expect to occur in the third quarter of this year," US Airways officials said in the memo.

The bankruptcy court has already signaled approval for the merger, which would create the world's largest airline. The deal faces only a few more hurdles, including approval from the U.S. Justice Department and US Airways shareholders.

American parent AMR will have 60 days to win support among creditors for its reorganization plan. Major creditors were closely involved in negotiations leading to the merger announcement in February, so it seems unlikely that they would derail the plan that will be considered by U.S. Bankruptcy Judge Sean Lane.

It's less clear whether antitrust regulators in the Justice Department will impose major conditions on the deal. Regulators approved other big airline mergers - Delta and Northwest, United and Continental, Southwest and AirTran - so industry analysts expect them to let this deal pass.

The Justice Department, however, could require the American-US Airways combination to give up takeoff and landing slots at Washington's busy Reagan National Airport, where it would be the dominant carrier, and possibly slots in New York too.

American has said that the reorganization plan will cover severance pay for AMR CEO Tom Horton, who will serve as chairman of the new company for only a short time. The February merger agreement included nearly $20 million in cash and stock for Horton, but the judge denied the payout - at least temporarily.

US Airways CEO Doug Parker will run the company, to be called American Airlines Group Inc. Parker would get $19.5 million if he is terminated by the new company for a reason other than misconduct, according to a filing Monday.

The combined airline is expected to operate more than 6,000 flights a day and have about 100,000 employees. Based on current figures, American will emerge slightly bigger than United Airlines and Delta Air Lines in the number of miles flown by passengers, the usual standard for ranking carriers.

American and AMR filed for bankruptcy protection in November 2011, and US Airways moved quickly to pursue a merger, originally over Horton's objections. The merger is a coup for Parker, who just a decade ago was running a much smaller carrier called America West Airlines. He merged that airline with US Airways, and then relentlessly pursued a deal with AMR last year. In a turning point, he convinced unhappy labor unions at American to back his merger plan.

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