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American Airlines parent files for Chapter 11 bankruptcy protection

By Bryen Dunn     Nov 29, 2011 in Travel
After months of speculated rumours, AMR Corporation has put through a claim in the United States for bankruptcy protection under the Chapter 11 Bankruptcy Code. American Airlines is assuring its customers it's business as usual during this reorganization.
Earlier today, AMR Corporation, the parent company of American Airlines and American Eagle, filed voluntary petitions for Chapter 11 reorganization in the U.S. Bankruptcy Court for the Southern District of New York. According to a company issued statement, the corporation took this action in order to achieve a cost and debt structure that is industry competitive, and thereby assure their long-term viability and ability to continue operating for the foreseeable future.
American Airlines and American Eagle are continuing to operate normal flight schedules without interruption, and all other departments including reservations, customer service, AAdvantage program, Admirals Clubs are conducting business as usual. The corporation has made a commitment to continue business as usual as it takes the necessary steps to reorganize its operations, including honouring all tickets and AAdvantange miles, access to Admiral Clubs, and no employee layoffs. Various letters have been distributed indicating such details, and these filings have no direct legal impact on American's operations outside the United States.
Filing for Chapter 11 protection is not uncommon in the United States, and doesn't necessary mean the termination of a business entity. In fact, several organizations in the past have filed and come back as a much stronger company. AMR has indicated they have $4.1 billion in cash to ensure uninterrupted supply of goods and services during these proceedings.
AMR’s Board of Directors determined that a Chapter 11 reorganization is in the best interest of the Company and its stakeholders. Just as with the Company’s major airline competitors in recent years, the Chapter 11 process enables American Airlines and American Eagle to continue conducting normal business operations while they restructure their debt, costs and other obligations.
As announced separately today, the Board of Directors of AMR Corporation appointed Horton Chairman and Chief Executive Officer of the Company, succeeding Gerard Arpey, who informed the Board of his decision to retire. Horton will also succeed Arpey as Chairman and Chief Executive Officer of American Airlines and will retain the title of President.
Horton said, “This was a difficult decision, but it is the necessary and right path for us to take 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. In recent years, even as the airline industry faced unprecedented challenges, American strengthened our domestic and global network; fortified our alliances with the best partners around the world; launched a transformational fleet deal that will give American the youngest and most efficient fleet in the industry; and invested in our product, service and technology to build a world class customer experience."
“As we have made clear with increasing urgency in recent weeks, we must address our cost structure, including labour 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."
“Our Board decided that it was necessary to take this step now to restore the Company's profitability, operating flexibility, and financial strength. We are committed to working as quickly and efficiently as possible to appropriately restructure American so that it can emerge from Chapter 11 well-positioned to assure the Company’s long term viability and its ability to compete effectively in the marketplace,” Horton stated.
Horton continued, “Throughout the restructuring process, as always, our customers remain our top priority and they can continue to depend on us for the safe, reliable travel and high quality service they know and expect from us. We intend to maintain a strong presence in domestic and international markets, including our cornerstones in Dallas/Fort Worth, Chicago, New York, Miami and Los Angeles. As we and all airlines routinely do, we will continue to evaluate our operations and service, assuring that our network is as efficient and productive as possible."
“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. American Airlines has a strong, proud history and we will have a successful future. Working through this difficult, but necessary action and process, I am confident we will succeed in enhancing our reputation as a global leader known for excellence and innovation, a travel partner customers seek out, and a carrier that serves communities throughout the world,” Horton concluded.
More information can be found here.
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