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American Airlines' parent firm files for Chapter 11
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The Associated Press
The parent company of the third-largest U.S. air carrier, American Airlines, has filed for court protection from creditors, weighed down by massive debt from years of high fuel prices and labour struggles.
"It's time to turn the page and move the company forward," AMR Corp. CEO Thomas W. Horton said at a news conference Tuesday.
The path, he said, "will be hard," but it will also be "well-worn" as AMR finally does what all the major U.S. airlines have done since the 9/11 attacks: undergo a process intended to cut costs, unload debt and rearrange its affairs so that it can make a profit.
At the same time as the firm announced the filing, it said Gerard Arpey had stepped down to be replaced by Horton, the company president.
The 240,000 passengers who fly on American Airlines each day are not expected to feel any effects for now.
AMR reported American said it would continue to operate flights, honour tickets and take reservations, and that its frequent-flier program would not be affected.
Horton said, however, that as the company goes through a restructuring, it will probably reduce the flight schedule "modestly," with corresponding cuts in jobs.
Over a four-year period after 9/11, which triggered a deep slump in the airline industry, United, Continental, US Airways and Delta each filed for creditor protection.
Air Canada, Canada’s biggest airline, filed for protection on April 1, 2003.
Fuel costs rise 40%
The only risk to American Airlines passengers is if the restructuring fails, the airline ultimately liquidates and ceases to fly. Still, many travellers are protected in that case if they bought tickets with a credit card.
AMR said its fuel costs rose 40 per cent in the third quarter, and that labour-contract rules forced it to spend at least $600 million US more per year than other airlines, but Horton said there was no single factor that led to the filing.
The firm has continued to lose money while other U.S. airlines returned to profitability in the last two years.
Darryl Jenkins, a consultant who has worked for the major airlines, said AMR will be able to cut costs in bankruptcy, and that employees and shareholders would be the big losers.
"Labour is going to take a major hit," Jenkins said. "Their pensions are in danger."
The president of the pilots' union, Dave Bates, said his members were concerned about what the bankruptcy will mean for them — other airlines used bankruptcy to terminate pension plans.
Ray Neidl, an analyst with Maxim Group LLC, believes American might be pushed into a merger with US Airways.
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