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April 4, 2012 7:03 PM

AMR Discloses Bankruptcy Legal Tab, as US Airways Flies Closer

Posted by Brian Baxter

AMR, the bankrupt parent of American Airlines, has received requests for payment on more than $21.1 million in legal fees and expenses incurred by lawyers from five of the six firms representing the Fort Worth–based company since the start of its Chapter 11 case in November.

The fee requests come as US Airways and its lawyers from Latham & Watkins inch closer to a possible merger between the two aviation giants. The Am Law Daily reported in January that US Airways—whose vice president of legal affairs Paul Galleberg is a former Latham partner—had hired the firm to evaluate a potential tie-up with AMR.

The Wall Street Journal reported this week that several AMR creditors have been told by US Airways that a merger with American could yield more than $1.5 billion a year in combined additional revenue and cost savings. AMR has been trying to renegotiate agreements with its unions and bondholders in bankruptcy court, but the company has lost $1.76 billion (including $663 million in expenses) since the start of its Chapter 11 case last year, according to The Associated Press.

Beginning late last week, AMR's outside financial, legal, and restructuring advisers began submitting their applications for compensation in the holding company's Chapter 11 case in U.S. bankruptcy court in downtown Manhattan.

AMR's lead bankruptcy counsel from Weil, Gotshal & Mangesfresh off of the mammoth $383 million legal tab it racked up for its work in the Lehman Brothers bankruptcy—is seeking compensation for almost $7 million in fees and expenses incurred between late November 2011 through January of this year. Court records show that Weil received $9.9 million in fees in the year prior to the start of AMR's bankruptcy case, including a $2.2 million retainer to advise on the airline's restructuring.

Debevoise & Plimpton, which is serving as special aircraft counsel to AMR, has submitted bankruptcy bills totaling more than $11.3 million between November of last year through February 2012. (Click here, here, and here for those fee requests.) Paul Hastings, special labor counsel to AMR, billed its client for nearly $1.4 million in fees and expenses during December.

AMR's special benefits counsel the Groom Law Group submitted bills for nearly $1.2 million in fees and expenses between late November and late February, while special conflicts counsel Haynes and Boone has billed the debtor for $288,155 during that same period. Another firm retained by AMR, Morgan, Lewis & Bockius, has yet to submit billing statements with the bankruptcy court.

All of the compensation requests submitted by AMR's external advisers are subject to an automatic 20 percent holdback on professional fees, which means the aviation company is only on the hook for about $17 million in payments to its outside lawyers so far, should there not be any objections raised to the expenditures in bankruptcy court.

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And the lawyers get richer, the stockholders and employers, not so much. Cant' wait to see the exit packages that are negotiated for those leaving after AMR emerges from bankruptcy.

Pursuant to my last post, I am not slamming the lawyers. What they do is very difficult. I'm slamming a system that screws stockholders and employees while protecting the morons whose "leadership" contributed greately to this fiasco.

Scatlolakis hit it on the head. These unethical, immoral and inept management teams screw the hard working employees and shame on our government for letting them get away with it!

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