American Airlines gives in; files for bankruptcy

AMR Corp, the parent company of American Airlines, filed for voluntary Chapter 11 bankruptcy protection in a New York court on Tuesday to restructure debt.

FP Staff November 29, 2011 19:12:25 IST
American Airlines gives in; files for bankruptcy

AMR Corp, the parent company of American Airlines, filed for voluntary Chapter 11 bankruptcy protection in a New York court on Tuesday to restructure debt.

American, the third largest airline in the US, posted a loss of $868 million during the first nine months of this year. It was the only airline in the US to have reported a loss in 2010 according to a report in cbsnews.com.

The airline has been struggling with rising labour and fuel costs and an aging fleet but has not merged with another airline, unlike many of its peers.

American Airlines gives in files for bankruptcy

It remains the only major airline that still must fund worker pensions. Reuters

American is the only carrier that did not file for bankruptcy protection after the terrorist attack on World Trade Centre in 2001. Its peers, that had filed for bankruptcy, however, gave the airline tough competition.

AMR's top rivals, UAL Corp and Delta Air Lines, both of which used bankruptcy protection to slash costs, have since found merger partners. Delta bought Northwest Airlines and UAL Corp bought Continental Airlines to form United Continental Holdings.

Wages and benefits for the airline's  union workers are generally higher as a percentage of operating expenses than at rivals that restructured their bankruptcy in the last decade.

It remains the only major airline that still must fund worker pensions.

The airline was also negotiating with all its workers as far back as in 2006, in an effort to boost employee productivity, reported Bloomberg.

AMR shares lost 79 percent in 2011. Analysts including Philip Baggaley of S&P had warned that the company could face a cash crisis during the next twelve months if new labour agreements were not signed, Bloomberg reported.

AMR also named Thomas Horton as its chairman and chief executive, replacing Gerard Arpey, who retired, the company said in a separate statement.

The company has listed assets of about $24.72 billion, while it has liabilities of $29.55 billion. The company said it has $4.1 billion in cash.

AMR said both American Airlines and American Eagle are expected to fly normal schedules throughout the Chapter 11 process.

"We plan to initiate further negotiations with all of our unions to reduce our labor costs to competitive levels," CEO Horton said.

The company said the bankruptcy has no direct legal impact on operations outside the US and that it is not considering debtor-in-possession financing.

With inputs from Reuters

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