Judge Sends American-US Airways Merger Plan to Creditors For Vote, AA Passenger Traffic Up in May

American Airlines’ new and old livery

U.S. Bankruptcy Court Judge Sean H. Lane entered the order approving American Airlines’ parent AMR Corp.’s “disclosure statement,” essentially the airline’s reorganization plan, and authorized AMR stockholders and creditors to vote on the plan.  In addition, American reported that its passenger traffic for May rose slightly, up 8% as capacity remained the same.  The airline said its consolidated record load factor was at 84%, a record for the month.

Voting will begin on June 20 and is slated to be completed by July 29.  Assuming that the plan is ratified, Judge Lane will hold a hearing on August 15 where he will be asked to sign off on it.   This phase is one of the last steps as American moves towards final court approval of its reorganization and merger with US Airways.

In addition to provisionally approving a $20 million severance package for AMR CEO Tom Horton, Judge Lane also approved a deal between the airline and Citigroup that will allow the two parties to continue to market the Citi AAdvantage card, a joint program aimed towards members of the airline’s frequent flyer program.

American filed for bankruptcy court protection in November 2011 with an eye of cutting operational costs.  A merger with US Airways was announced in February and would create an airline with a market value of approximately $11 billion.  American’s restructuring is considered unique in that it is not only paying back AMR’s bondholders in full but giving current shareholder’s 3.5% of the combined company, which will be called American Airlines Group.  Regulatory approval is required before the deal can close and the companies have expressed plans for this to happen in the third quarter of 2013.  US Airways CEO Doug Parker will assume that position after the merger and Mr. Horton will serve as non-executive chairman until next spring.

(Photo: Accura Media Group)