Trustee questions $20 million payout in American Airlines bankruptcy

The U.S. trustee overseeing the bankruptcy proceedings for American Airlines’ parent company is questioning a $19.9-million severance package for the company’s top executive.

In a filing made last week, Trustee Tracy Hope Davis said the airline, which filed for bankruptcy in 2011, is obligated to explain the severance package it proposes for its Chief Executive Tom Horton.

AMR plans to merge with US Airways Group, the parent company of US Airways, to form what is expected to be the nation’s largest airline.

The newly merged company will be run by US Airways Chief Executive Doug Parker, with Horton taking the position of chairman of the board.

In court records, AMR requested a change in its payment policy to give Horton the payout after he loses his post as CEO.

Davis has rejected a motion to make the payment until the company explains why making a sweeping change to its payment policy is permissible under the bankruptcy code.

In her objection, Davis said bankruptcy law bars bonuses and severances “without factual and circumstantial justification.”

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