American Airlines: Belly Up in Bankruptcy

AMR Corp (NYSE:AMR) parent company of American Airlines, up until now the “last man standing” with Chapter 11 filings by U.S. airlines, filed for bankruptcy Tuesday. Its action meant that every major airline in the U.S. has now filed for Chapter 11.

The filing was triggered after a labor deal with pilots fell through and rising fuel costs became impossible to sustain. AMR had so far avoided bankruptcy in the face of competitors who had used Chapter 11 as a springboard to restructure labor agreements and to reduce overheads. As a result, AMR was left lugging the highest labor costs and funded worker pensions.

AMR said in its bankruptcy filing that its cost-cutting in recent years had been insufficient and that it could not maintain its operations without changing its “uncompetitive cost structure. Without addressing the realities of the marketplace, AMR cannot be competitive with its peers,” it said.

David Bates, president of the Allied Pilots Association, said in a statement, “While today’s news was not entirely unexpected, it is nevertheless disappointing that we find ourselves working for an airline that has lost its way. The 18-month timeline allotted for restructuring will almost certainly involve significant changes to the airline’s business plan and to our contract.”