American Airlines seeks Ch. 11 protection


The primogenitor association of American Airlines filed for failure insurance Tuesday, seeking service from abrasive debt caused by high fuel prices and dear labor contracts that a competitors strew years ago.

The association also transposed a CEO, and a incoming personality pronounced American would substantially cut a moody report “modestly” while it reorganizes. He did not give specifics. American pronounced a frequent-flier module would be unaffected.

AMR Corp., that owns American, was one of a final vital U.S. airline companies that had avoided bankruptcy. Competitors used failure to strew dear labor contracts, disburden themselves of debt, and start creation income again. Delta was a final vital airline to record for failure protection, in 2005.


American — a nation’s third-largest airline — was stranded with aloft costs and had to compare a competitors’ revoke fares or remove passengers.

Other airlines also grew by posterior acquisitions and expanding overseas. American was a biggest airline in a universe in 2008, though has been surpassed by United, that total with Continental, and Delta, that bought Northwest.

In announcing a failure filing, AMR pronounced that Gerard Arpey, a maestro of a association for roughly 3 decades and CEO given 2003, had stepped down and was transposed by Thomas W. Horton, a association president.

Horton pronounced a house of directors unanimously motionless to record for failure after assembly Monday in New York and again by discussion call on Monday night.

“The destiny on a other side of this restructuring is really bright,” Horton said. “We comprehend we have a lot of work to do between now and then. I’m going to go out and do it.”

In a filing with sovereign failure justice in New York, AMR pronounced it had $29.6 billion in debt and $24.7 billion in assets.

With reductions to a moody schedule, Horton pronounced there would substantially be analogous pursuit cuts. American has about 78,000 employees and serves 240,000 passengers per day.

For travelers, American pronounced it would continue to work flights, respect tickets and take reservations.

AMR’s pierce could also trigger some-more converging in a airline attention — some analysts trust American is approaching to combine with US Airways.

The association will check a spinoff of a informal airline, American Eagle, that was approaching early subsequent year.

AMR, however, wants to pull forward with skeleton to sequence 460 new jets from Boeing and Airbus, and some-more than 50 prior jet orders. New planes would save American income on fuel and maintenance, though a orders will be theme to capitulation by a failure court.

AMR stockholders will be wiped out. The batch had already mislaid 79 percent of a value this year on fears of bankruptcy. The batch fell to 35 cents Tuesday afternoon, down $1.26 from a day before.

AMR has mislaid some-more than $12 billion given 2001, and analysts design it will post some-more waste by 2012. Speculation about an AMR failure grew in new weeks as a association was incompetent to win kinship capitulation for contracts that would revoke labor costs. The association pronounced it was spending $600 million some-more a year than other airlines since of labor-contract rules.

On Tuesday, Horton pronounced no singular cause led to a failure filing. He pronounced a association indispensable to cut costs since of a diseased tellurian economy and high, flighty fuel prices. The cost of jet fuel has risen some-more than 60 percent in a past 5 years.

Ray Neidl, an researcher with Maxim Group LLC, an investment banking company, pronounced AMR was correct to record for failure while it still had about $4 billion in cash. That way, a association will have a pillow to keep handling though worrying immediately about backing adult new financing, he said.

Neidl pronounced a association has clever resources though needs to find labor assent and some-more revenue. He pronounced American competence be pushed into a partnership with US Airways.

The boss of a pilots’ union, Dave Bates, pronounced his members were endangered about what a failure will meant for them. Other airlines used failure to cancel grant plans.

“While today’s news was not wholly unexpected, it is but unsatisfactory that we find ourselves operative for an airline that has mislaid a way,” Bates pronounced in a summary to pilots.

Darryl Jenkins, a consultant who has worked for a vital airlines, pronounced that AMR will be means to cut costs in bankruptcy, and that employees and stockholders would be a large losers.

“Labor is going to take a vital hit,” Jenkins said. “Their pensions are in danger.”

James C. Little, boss of a Transport Workers Union, that represents mechanics, container handlers and other belligerent workers during American, was oppressive in his comment of a impact on labor.

“This (bankruptcy) is approaching to be a prolonged and nauseous routine and the kinship will quarrel like ruin to make certain that front line workers don’t compensate an astray cost for management’s failings,” Little said.