THE PARENT company of American Airlines Inc. (AA), AMR Corporation, yesterday filed voluntary petitions for bankruptcy protection in the US, citing the need to achieve industry competitiveness.
“AMR’s board of directors determined that a Chapter 11 reorganisation 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,” it stated in a press release.
It would be business as usual for the airlines during the Chapter 11 process, including flights, services, tickets and reservations, frequent flier programmes, and payment for suppliers, among others.
Thomas W. Horton, chairman, chief executive officer and president of AMR and American Airlines, 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.”
He added: “But as we have made clear with increasing urgency in recent weeks, we must address our cost structure, including labor costs, to enable us to capitalise 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.”
AMR said that it has approximately US$4.1 billion in unrestricted cash and short-term investments and that it would be more than enough to pay for goods and services during the Chapter 11 process.
In a separate announcement, AMR Corporation’s board of directors appointed Horton chairman and chief executive officer of the company, succeeding Gerard Arpey, who is retiring. He will also succeed Arpey as chairman and CEO of AA and will retain the title of president.
