American Airlines bankrupt
28 / 11 / 2011
AMERICAN Airlines (AA) has become the last of the major US airlines to file for bankruptcy. The carrier’s parent company – AMR Corporation – filed for Chapter 11 protection, which in the US means a company or person may restructure their loans but still continue operating. Analysts had long said the AA’s reluctance to do so earlier had left it at a disadvantage compared with its competitors.
“Our board decided that it was necessary to take this step now to restore the company’s profitability, operating flexibility and financial strength,” Thomas Horton, the company’s new chairman and chief executive officer, said in a statement. Horton, was formerly the company’s president, and now replaces Gerald Arpey who will retire. Asprey fought against bankruptcy for years, as it would have meant abandoning the pension schemes of its employees. He was asked to stay on but refused.
The airline said it intends to continue operating a normal service and that the restructuring will not affect its passenger or cargo customers.
AA had been crippled by debts and rising employment costs. Talks with unions had faltered but now by entering Chapter 11, AA has more freedom to refuse union offers.
“Achieving the competitive cost structure we need remains a key imperative in this process,” Horton said, “and as one part of that, we plan to initiate further negotiations with all of our unions to reduce our labour costs to competitive levels.”
AMR lost US$471 million last year and $982 million in the first nine months of this year and an estimated £1.1 billion for the whole year, which has caused the company’s stock price to plummet 79 per cent. It currently has $29.6 billion in debt.