American Airlines finally enters bankruptcy proceedings

29th Nov 2011
American Airlines finally enters bankruptcy proceedings

AMR Corporation, parent company to American Airlines, has filed for Chapter 11 bankruptcy protection in the United States as it seeks to return to profitability.

AMR, which also operates American Eagle, took the decision after the failure of the latest round of cost-cutting labour negotiations and is the last of the major American carriers to seek such protection.

The decision was taken in order to “achieve a cost and debt structure that is industry competitive and thereby assure its long-term viability” of the carrier, explained a statement.

Following the lead of virtually all other major airline competitors in the United States, the Chapter 11 process will allow AMR to continue conducting normal business operations while it restructures its debt, costs and other obligations.

Normal flight services will continue, with the decision having no direct legal impact on operations outside the United States.
“We have met our challenges head on, taking all possible action to secure our long-term position,” said Thomas Horton, chairman, chief executive officer and president of AMR.

Horton earlier replaced Gerard Arpey, who yesterday informed the board of his decision to retire, at AMR.

He initially joined AMR in 1985 and held a range of senior financial positions with AMR before taking over the top position today.

Chapter 11

American has battled against bankruptcy for nearly a decade as rivals have slimmed down.

The carrier has been embroiled in negotiations with unions for all of its major work groups for five years as it sought to cut an $800 million labour-cost disadvantage to other carriers.

Pilots, flight attendants, mechanics and baggage handlers are all presently involved in disputes with the company.

The airline also has a fleet of older aircraft where are less fuel-efficient than those operated by rivals. As fuel prices have continues to rise conditions have become unsustainable for AMR.

“As we have made clear with increasing urgency in recent weeks, we must address our cost structure, including labour costs, to enable us to capitalise on our foundational strengths and secure our future,” continued Horton.

“Our very substantial cost disadvantage compared to our larger competitors, all of which restructured their costs and debt through Chapter 11, has become increasingly untenable given the accelerating impact of global economic uncertainty and resulting revenue instability, volatile and rising fuel prices, and intensifying competitive challenges.”

The Company has approximately $4.1 billion in unrestricted cash and short-term investments which it says will be sufficient to meet ongoing costs.

Passengers concerned over the possible impact on flights are advised to check the official website.


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