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Parent of American Airlines files for bankruptcy

April 8, 2014

DALLAS – American Airlines parent company AMR filed for Chapter 11 bankruptcy protection Tuesday, as the troubled firm tried to put its finances in order while keeping planes in the sky and passengers in seats.

“Chapter 11 reorganization is in the best interest of the company and its stakeholders,” the firm said in an early-morning statement, which also announced the departure of chairman and chief executive Gerard Arpey.

The filing will allow the Texas-based carrier, which has extensive routes within the United States and the Americas, to restructure with more legal room-for-maneuver to renegotiate or cancel service and wage contracts. American Airlines flies several times per week to Costa Rica from U.S. hubs in Dallas/Ft.Worth, New York City and Miami.

The airline said it hoped the move would help it secure “long-term viability” by improving costs, reducing its debt burden and trying to be more profitable amid rising jet fuel prices.

The airline, which serves 260 cities through a network that reaches 50 countries and territories, insisted it would continue “normal business operations.”

But that claim was slapped down by some industry analysts.

“Cuts will come: They’ve said everything is normal for now, but the cutting will surely start soon. They’ll reduce aircraft, employees and routes,” said Seth Kaplan of Airline Weekly.

“Look for American hubs like Dallas and Miami, where AA has a good competitive position, to escape relatively unscathed. Los Angeles and even Chicago, on the other hand, could be more vulnerable.”

AA said passengers will see tickets and air mileage plans honored.

The filing could have broad repercussions for the airline sector.

Rumors had swirled for months that AMR would file for bankruptcy protection, after an unusual spike in pilot retirements, with the pilots trying to sell off their own stocks in the company.

Shares in AMR have now plunged 95 percent in the last year, selling at 32 cents a share, giving the company a market value of around $105 million.

The move will fuel speculation that American Airlines is looking for a merger in an industry that has seen a swathe of consolidation in recent years and regularly suffers from oil or other shocks.

Most of the best-known US airlines have filed for bankruptcy at some point since 1978, according to data from the Air Transport Association. Most have emerged from bankruptcy with the notable exception of PanAm, which collapsed in 1991.

Since the attacks of September 11, 2001, Hawaiian Airlines, United Airlines, U.S. Airways (twice), Northwest Airlines and Delta Air Lines have all filed for Chapter 11 protection, which permits reorganization while under protection from creditors.

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