DALLAS (AP) — A federal judge has cleared the way for American Airlines' creditors to vote on a merger with US Airways.
U.S. Bankruptcy Judge Sean Lane on Tuesday approved American parent AMR Corp.'s description of its restructuring plan, including a merger that would create the world's biggest airline.
If creditors approve the plan, the company will return to court to seek final approval from Lane this summer.
At a hearing Tuesday in New York, the judge delayed ruling on a $19.9 million severance package for AMR CEO Tom Horton.
The U.S. trustee's office, part of the Justice Department, objected that the size of Horton's payout violated at 2005 law designed to limit payments by bankrupt companies to insiders. Lane postponed a decision until he makes a final ruling on AMR's reorganization plan this summer.
Under the merger plan, the combined airline will be run by US Airways Group Inc. CEO Doug Parker, and Horton will serve briefly as chairman before stepping down. The merged company will be called American Airlines Group Inc. and based in Fort Worth, Texas.
AMR spokesman Michael Trevino said the company was pleased that the bankruptcy judge approved the description of its turnaround plan — called a disclosure statement — "allowing us to move forward with our restructuring and our planned merger with US Airways."
Trevino said in a statement that the plan would "provide the foundation for a stronger future for our people and our customers."
AMR lost money in April, but it has slashed labor costs by about one-fifth, and Horton said last week that the company was on track for a "strongly profitable" April-to-June quarter.
The merger and turnaround plan would result in full repayment to AMR bondholders. Shareholders, whose investments usually are wiped out in bankruptcy, would get at least 3.5 percent of the new company's stock.
AMR filed for bankruptcy protection in November 2011, and US Airways pushed for a merger throughout 2012. In February the companies announced plans to merge. The combined airline would leap over No. 1 United Airlines and No. 2 Delta Air Lines to become the largest carrier by passenger miles.