American Airlines files for Chapter 11 bankruptcy protection
AMR Corporation, parent of American Airlines and AMR Eagle Holding Corporation, filed (29-Nov-2011) voluntary petitions for Chapter 11 reorganisation for itself and certain US-based subsidiaries, in order to achieve a cost and debt structure that is "industry competitive and assures long-term viability". American Airlines and American Eagle will continue conducting normal business operations, maintaining schedules and honouring all tickets/reservations, while they restructure debt, costs and other obligations. AMR has USD29.6 billion in debt and USD24.7 billion in assets. The carrier still has cash reserves of USD4.1 billion and unsecured liabilities of USD4.4 billion.
- Management: Gerard J Arpey resigned from his positions as a director, chairman and CEO of AMR/American Airlines. AMR/American Airlines president, Thomas W Horton has been elected as chairman and CEO, effective immediately. He will retain the position of president of AMR and American [more - Leadership change];
- Fleet: AMR stated it cannot afford to retain all the aircraft currently in the American/American Eagle fleets at their current rates, and will phase out aircraft and make substantial reductions in the cost of the aircraft retained. American Airlines placed orders and commitments for 460 aircraft from Airbus and Boeing this year, and will seek to accelerate its fleet renewal strategy. To conserve liquidity under Chapter 11, AMR plans to make payments when due of aircraft rent and mortgage principal and interest payments only on certain aircraft in its fleets;
- Partnerships: oneworld membership and partnerships with alliance partners will continue, as will codeshare partnerships. These are expected to remain unchanged as a result of the filing. American Airlines will pay any prepetition amounts owed to oneworld, as airlines in the alliance may vote to remove a member airline that is not paying costs. If such a vote were to occur, American Airlines would lose substantial passenger and cargo revenue;
- Network: AMR will continue to evaluate the operations and service of American and American Eagle, assuring its network "is as efficient and productive as possible." It intends to maintain a strong presence in domestic and international markets, including "cornerstones" in Dallas/Fort Worth, Chicago, New York, Miami and Los Angeles;
- American Eagle sale: Previously announced spin-off of Eagle Holding will be placed on hold pending the outcome of the Chapter 11 cases;
- Workforce: Wages, healthcare coverage, vacation and other benefits will continue without interruption. American plans to initiate further negotiations with all its unions to reduce labour costs to "competitive levels";
- Stock and bonds: If AMR does not meet New York Stock Exchange (NYSE) criteria its stock may be delisted from the exchange. NYSE said it would continue to review and monitor the listing status of AMR. AMR stock lost 85% of value before trading was halted. No interest will be paid on bonds and interest will not accrue on unsecured securities during the Chapter 11 proceedings. [more - original PR]
American Airlines: “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.... 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," Thomas W Horton, chairman, CEO and president of AMR and American Airlines. Source: Company release, 28-Nov-2011.