Bankrupt airline's CEO could get $20 million

After piloting American Airlines through bankruptcy, chief executive Tom Horton would receive $19.8 million in cash and stocks as part of a merger with US Airways -- if a judge allows it.

By Bruce Kennedy Mar 27, 2013 2:47PM

American Airlines President and CEO Thomas Horton, reacts as he testifies on Capitol Hill in Washington, Tuesday, March 19, 2013 (© Manuel Balce Ceneta/AP Photo)A U.S. bankruptcy judge in New York is reviewing controversial plans by American Airlines to approve a $19.8 million severance package for CEO Tom Horton -- as part of is proposed merger with US Airways (LCC).

 

The trustee overseeing the bankruptcy of the airline's parent company, AMR (AAMRQ), filed an objection last week, saying the agreement doesn't conform to U.S. bankruptcy law. According to The Star Telegram, Horton -- who is expected to become chairman of the combined company -- would receive a cash and stock package once the merger is finalized.

 

"The Employee Arrangements are on market terms, are carefully designed to incentivize employees to remain focused on consummating the Merger,” AMR reportedly said in its filing, “and will allow the Debtors to maximize the value of the Merger for the benefit of their stakeholders.”

 

The judge is also expected to hear arguments about the proposed merger during Wednesday's hearing -- as well as AMR's request to extend the period for its Chapter 11 reorganization plan to the end of May.

The planned merger is reportedly worth $11 billion. And The Dallas Business Journal says the new airline will create an additional $1 billion in value above what US Airways and American were worth before American's bankruptcy.

 

Steve Fox, a Dallas attorney specializing in executive compensation, says American's severance plan for Horton is on par with industry standards.

 

"Initially, people react to the amount in a negative way because, let's face it, the company went into bankruptcy," he told the Journal. "But when you dig deeper, the package is probably not out of line in terms of what other CEOs have received in connection with their departure in a merger transaction."

 

And industry analysts believe that, even if the judge objects to Hornton's current deal, a new compensation plan would be approved for him once the US Airways-American merger goes through.

 

"Instead of walking away with $20 million, he'll walk away with $15 million," airline consultant Mike Boyd told The Star Telegram.

 

The merger, planned to close in September, is expected to create the world's largest air carrier, with 900 routes and about 100,000 employees. 


 

More on moneyNOW

62Comments
Mar 27, 2013 3:46PM
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$20 million seriously!!!!  That's 500 $40,000 positions, or a whole factory of workers.  Its not the laziness of the workers that is killing the lower classes its the greed at the top.
Mar 27, 2013 3:27PM
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Just because it's been that way before doesn't make it right. Stop paying CEO's for doing poor jobs and maybe they might try to actually work.
Mar 27, 2013 3:43PM
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That's right. CEO's actually tend to work less than anyone else in the company. They have so many assistants and people under them, all they do is sign off on the final decision. I don't think that's worth 15 million. Why not give him 1 million, and than hire a couple hundred thousand people with the other millions. That is how you would get this country moving again. All the money is going to one place.
Mar 27, 2013 3:51PM
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He should owe the bankrupt company, he ran into the ground, 25 Million.
Mar 27, 2013 3:58PM
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Congress sits on its **** and allows CEO to rip off the public with golden bonuses for getting the job and golden parachutes when they leave.  Why because the CEO contributes to their campaigns.  It is criminal.
Mar 27, 2013 3:56PM
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And... "he is expected to become chairman of the combined company"  !!!!   He's not walking away!

This on the backs of employees who have lost substantial amounts in salaries and pensions.

 

This is a crime.

 

Mar 27, 2013 4:03PM
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if he is going to be the CEO of the new combined entity why does he need a severence payment?
Mar 27, 2013 3:56PM
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And I am sure that they are all in Stock Options. That way they do not have to pay the 30% tax rate on it...only 14 - 15% on the dividends. Why do CEO's get rewarded for driving a company to bankruptcy? Why is Congress letting people like this idiot get away with this when there are so many underpaid employees working at American? It is not there fault that the people at the top make decisions towards what benefits the top managers and not the company. Must be nice to have a job that you stink at and stil get paid handsomely....where do I sign up?
Mar 27, 2013 4:15PM
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Failure for employees = Your FIRED!  Failure for CEO's with Failing Companies and Bankruptcy = Reward....is there any wonder why America is where it is! 

Mar 27, 2013 3:45PM
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Cap CEO pay at $400,000 per year for ALL compensation. Salary, stock options, total compensation.
Mar 27, 2013 3:50PM
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Whats funny is Americans complain about how much these execs make and how they should spread the money around but yet they bash unions for being greedy trying to get the working man a living wage.
Mar 27, 2013 3:57PM
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A total slap in the face to every hard working person at the old AMR. This country is a whore house. All about me, me, and me and my wallet. 
Mar 27, 2013 3:54PM
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Tired of the CEO of your company making tens of millions while you make $10 an hour?  FORM A UNION!  Get the rights you deserve.  Management is a union or didnt you realize that?  They get health insurance, dental, and a 401K plan.  They get raises when the cost of living goes up.  They get bonuses.  They get a pension.  Thats what Unions fight to get the workers.

 

You know the easiest way to tell a Union is good for you the worker?  Your manager says its bad for you.  He doesnt want to spread the wealth or give you more because thats less money he can get in bonuses.

Mar 27, 2013 4:11PM
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You have got to be kidding me

Horton is a complete moron.

He couldn't manage a slushy machine at a 7/11

Mar 27, 2013 4:51PM
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How about paying the pension funds for the people who actually work for the airlines?
Mar 27, 2013 4:28PM
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CEO's use to be held accountable for the poor performance of a company because their job is to LEAD.  Nowadays they are rewarded just for showing up and running companies into the ground.  Their Job description should include the very real expectation of leading the company to profitability using all the considerable resources that they have available to them.  This includes taking very real risks that although not guaranteed may lead to windfall opportunities to cash in.  Now they may want to hedge their bet by taking a number of risks and sure bets but sitting on cash and waiting for it to run out is not one of them.  So lets reward the creative, visionary CEO's and FIRE the Seat Warmer CEO's with a Pink Slip like we give anyone that does not do their job!!!
Mar 27, 2013 4:39PM
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This is just stupid economics. If I were running a board of directors and had 20 million for a CEO, I would be more inclined to do this......Pick seven outstanding and superlative executive operators with superior pedigrees....pay them each say, $475,000 bucks. That's a lot of money in my circle. That's $3,325,000 total. Use the other 16 million plus to pour back into the company and employees. You can't tell me that seven talented professionals can't make better decisions and put out more work than one person.
Mar 27, 2013 4:47PM
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One Comment is one of the BEST, I've ever read on MSN...

Excellent BROOD 550....*edited*

 

"A WHOLE Factory of WORKERS (500) making $40,000 a year"...!!

 

There's your ANSWER, to many of our problems of today...

And a BANKRUPTED Company to boot...sweet geezus.!!

In Japan several Decades ago, he would or would have to commit Hari-Kari (sp)..not get 20 mil...

Mar 27, 2013 4:04PM
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Just imagine how pis**ed off the right wingers would be if $200 checks were cut to a 100,000 poor people.
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