AMR Declares Bankruptcy
AMR Corporation and its two U.S. airline subsidiaries, American Airlines and American Eagle, filed for Chapter 11 bankruptcy today after failing to agree to cost-cutting measures with its pilots. The only major U.S. airline company to avoid bankruptcy over the past decade, AMR finally succumbed to pension funding burdens and high fuel costs while its main rivals shed labor costs under Chapter 11 and subsequently engaged in consolidation.
“We took this action in order to achieve a cost and debt structure that is industry competitive and thereby assure our long-term viability and ability to continue delivering a world-class travel experience for customers,” said the company in a statement. American Airlines and American Eagle will continue to operate normal flight schedules, maintain their frequent-flier programs, honor all employee wages and benefits and carry on with all their code-share relationships, it added.
AMR also announced today that it has replaced retiring chairman and CEO Gerard Arpey with Thomas Horton, who will also retain his position as president. Under its Chapter 11 filing in the Southern District of New York, the company listed assets of some $24.72 billion, $29.55 billion in liabilities and $4.1 billion in cash. AMR lost $162 million in the third quarter and has posted losses in 14 of the last 16 quarters.
“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,” said Horton. “Our very substantial cost disadvantage compared to our larger competitors, all of which restructured their costs and debt through Chapter 11, has become increasingly untenable given the accelerating impact of global economic uncertainty and resulting revenue instability, volatile and rising fuel prices, and intensifying competitive challenges.”