American Airlines files for Chapter 11 bankruptcy protection
World's fourth largest airline says it will honour tickets and reservations as it restructures its debts and costs
American Airlines, the world's fourth largest airline, has filed for Chapter 11 bankruptcy protection.
The decision comes as the airline tries to "achieve a cost and debt structure that is industry competitive and thereby assure its long-term viability and ability to continue delivering a world-class travel experience for its customers," the company said in a statement.
AMR, the airline's parent company, said American Airlines, American Eagle and all its other subsidiaries would honour all tickets and reservations and operate normal flight schedules during the bankruptcy filing process.
AA has long been touted as the US airline most likely to go bankrupt as it struggles with high labour costs and weak cash flow. Last month the company reported a third-quarter loss of $162m (105m), blaming higher fuel costs and unfavourable foreign exchange rates.
At the results announcement AMR's chief executive Gerard Arpey said the airline hoped to reduce costs with new labour agreements and more fuel-efficient planes. "The goal is to become more competitive," he said. "It's now become our No 1 priority."
Many of American Airlines rivals filed for bankruptcy after the 2001 terror attacks and the recession took their toll on businesses, allowing them to renegotiate costly labour agreements and other contracts.
Competitors have gone on to enjoy healthy profits as demand increased and revenue from extra fees for bags, food and seat upgrades added to the bottom line.
"Just as with the company's major airline competitors in recent years, the Chapter 11 process enables American Airlines and American Eagle to continue conducting normal business operations while they restructure their debt, costs and other obligations," the company said.
American Airlines was the only major carrier not to turn a profit last year and looks set to announce another f! ull-year loss in 2011.
Rumours that AA was about to file for Chapter 11 bankruptcy were renewed last month when it emerged that there had been an unusually high number of pilot retirements in September and October. But the company has repeatedly said it was not considering filing for bankruptcy.
AMR named Thomas Horton as chairman and chief executive; Arpey will retire. "This was a difficult decision, but it is the necessary and right path for us to take and take now to become a more efficient, financially stronger, and competitive airline," Horton said.
The company has about $4.1bn in cash and short-term investments that it said would be used to pay vendors, suppliers and other business partners during the Chapter 11 process.
"American Airlines and American Eagle are operating normal flight schedules today, and their reservations, customer service, AAdvantage(R) program, Admirals Clubs and all other operations are conducting business as usual," said the company.
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