American Airlines files for bankruptcy

TUESDAY, NOV. 29: The parent company of American Airlines, AMR, filed for Chapter 11 bankruptcy in the US today.

The airline has daily flights to Bermuda from Miami and New York.

American plans on continuing its normal flight schedule while it works through reorganization.

A Chapter 11 bankruptcy allows a company to restructure its debt so it can get rid of some high overhead costs and become more competitive while remaining in operation.

Several major airlines have filed for bankruptcy protection over the past decade.

Delta Airlines filed for Chapter 11 bankruptcy in 2005 while United did so in 2002 and Air Canada in 2003. US Airways has filed for Chapter 11 twice — once in 2004 and previously in 2002.

American will continue to:

• Honour tickets and reservations, and make exchanges and refunds as usual;

• Fully maintain AAdvantage frequent flyer and other customer service programs, and ensure all AAdvantage miles and elites status earned by members remain secure and intact;

• Remain an integral member of the oneworld alliance with British Airways, of which American is a founding member, and continue its codeshare partnerships;

• Pay suppliers for goods and services received during the reorganization process.

Thomas W. Horton, chairman, CEO and president of AMR and American Airlines – who replaced Garard Aprey as CEO and chairman today, said: "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.

"We have met our challenges head on, taking all possible action to secure our long-term position.

"We have made clear with increasing urgency in recent weeks, we must address our cost structure, including labor costs, to enable us to capitalize on these foundational strengths and secure our future.

“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.”

"Achieving the competitive cost structure we need remains a key imperative in this process 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.”

The Company has approximately $4.1 billion in unrestricted cash and short-term investments.

This cash, as well as cash generated from operations, is anticipated to be more than sufficient to assure that its vendors, suppliers and other business partners will be paid timely and in full for goods and services provided during the Chapter 11 process in accordance with customary terms.  

Because of American's current cash position, the need for debtor-in-possession financing is neither considered necessary nor anticipated.