American Airlines’ request for court approval of a $20 million severance for Chairman and Chief Executive Officer Tom Horton was opposed by the U.S. government’s bankruptcy watchdog.

The compensation, which would be paid half in cash and half in stock, is prohibited by bankruptcy law, the U.S. Trustee’s office said in a court filing today in U.S. Bankruptcy Court in Manhattan.

Horton’s severance would be paid as part of American parent AMR Corp.’s exit from bankruptcy protection by merging with US Airways Group Inc. to create the world’s largest airline. The U.S. previously objected to the severance agreement when the bankruptcy court approved the merger in March.

Mike Trevino, a spokesman for Fort Worth, Texas-based AMR, said the agreement with Horton “is not in any way prohibited by the terms and provisions of the bankruptcy code.”

“Furthermore, AMR’s creditors and shareholders have voted overwhelmingly to accept the plan, which includes the chairman letter agreement,” he said in an e-mailed statement.

The case is In re AMR Corp., 11-15463, U.S. Bankruptcy Court, Southern District of New York (Manhattan).

Editors: Andrew Dunn, Michael Hytha. To contact the reporter on this story: David McLaughlin in New York at To contact the editor responsible for this story: Andrew Dunn at

Photo Credit: American Airlines CEO Horton appears before Senate Judiciary Committee in Washington. Gary Cameron / Reuters