SOMETIMES IT PAYS TO GET LAID OFF

February 22nd, 2013

Minnesota air travelers may have heard that American Airlines has announced plans for merging with US Airways.

The new company will be run by Doug Parker, the current CEO of US Airways Group Inc. However, Minnesota readers don’t need to express any sympathies to American Airlines’ current CEO, Tom Horton. Mr. Horton is expected to receive a severance package worth nearly $20 million.

AMR Corp., the parent company of American Airlines, recently confirmed that is board had approved the severance package as reasonable. The $20 million figure was determined based on several factors, including Mr. Horton’s length of service with the company, his leadership during the company’s 2011 bankruptcy filing, and the value that the merger will create for company stakeholders.

Pending approval by AMR’s bankruptcy judge and federal antitrust regulators, the airlines hope to complete the deal by the end of September 2013. AMR creditors are slated to get 72 percent of the stock of the new company. Shareholders will also get a small portion.

As this post illustrates, negotiating executive severance agreements can be big business — and generate big publicity. The most artfully drafted agreements contain detailed terms and provide for various contingencies. An experienced employment attorney can help executives and professionals finalize a thorough severance agreement that will ensure a smooth transition to future endeavors.

Of course, with a severance package like Mr. Horton’s, he will be well positioned to take his time in searching for a new position. One analyst believes Mr. Horton would be a good leadership candidate in another airline or even another industry.

Source: TwinCities.com, “AMR CEO Horton in line for $20 million severance,” David Koenig, AP, Feb. 15, 2013.