American Airlines Bankruptcy – Parent Company AMR files for Chapter 11 protection

Today, the parent company of American Airlines, the AMR Corporation announced that it had filed for bankruptcy protection. The company cited its enormous debt burden and labor costs as the driving force behind the decision.

American Airlines is one of the few remaining major airlines, known as the ‘legacy’ carriers which have survived since the glory days of the industry. Mergers and bankruptcy have done away with many of its former rivals including names like PanAm, and TWA. More recently Northwest Airlines merged into Delta Airlines, and after this month the name Continental Airlines will cease to exist as it completes its merger with United.

But of all the legacy carriers, AMR is the last to file for chapter 11 protection. Recent changes to bankruptcy rules will not give American the same advantages which its competitors received in their proceedings. It was only a few short years after filing for bankruptcy that Delta purchased Northwest.

For customers concerned about current and future travel plans on American Airlines, the company announced its intention to continue with normal operations during the process. Such has been the common practice for airlines in the past.

For frequent fliers and others flying on American, the bankruptcy process should have any affect on your travel plans or mileage awards.

In a statement, newly named Chairman and CEO for AMR said, “Our board decided that it was necessary to take this step now to restore the company’s profitability, operating flexibility and financial strength.”

Bad news for employees as, according to statements, one of American’s main focuses during the bankruptcy process is to reduce its labor costs.

“Achieving the competitive cost structure we need remains a key imperative in this process,” Mr. Horton said, “and as one part of that, we plan to initiate further negotiations with all of our unions to reduce our labor costs to competitive levels.”

As recent negotiations between the company and the pilots’ union have reached an impasse, the federal bankruptcy rules, which allow companies to reject contracts, may give the company it needs to get the reductions they want. Not good news for the pilots and other employees at American Airlines