From cbsnews
"DALLAS - American Airlines, the nation's third largest airline, has filed for Chapter 11 bankruptcy this morning.
The Texas-based AMR Corporation, the parent company of American Airlines and American Eagle, announced that the company and certain of its U.S.-based subsidiaries (including both carriers) today filed voluntary petitions for Chapter 11 reorganization in the U.S. Bankruptcy Court for the Southern District of New York, "in order to achieve a cost and debt structure that is industry competitive and thereby assure its long-term viability and ability to continue delivering a world-class travel experience for its customers."
It says the move is in the best interest of both companies and its shareholders.
American also said its CEO Gerard Arpey will step down. He's being replaced by Thomas Horton, currently the company's president.
The Chapter 11 reorganization process would enable to airline to continue normal business operations.
AA bankruptcy won't affect fliers, company says
American said it is operating normal flight schedules, honoring tickets and reservations as usual, and making normal refunds and exchanges.
"American's customers are always 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," said Thomas W. Horton, chairman, chief executive officer and president of AMR and American Airlines.
American lost $868 million during the first nine months of this year, and was the only major U.S. airline to lose money last year.
In a press release this morning, AMR said it has approximately $4.1 billion in unrestricted cash and short-term investments, which it is said is "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."
The company's current cash position means the need for debtor-in-possession financing is not anticipated.
"Our board decided that it was necessary to take this step now to restore the Company's profitability, operating flexibility, and financial strength," said Horton. "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."
American has been unable to reach a new cost-saving contract with its pilots. It has been trying to upgrade its aging fleet of planes, and has not merged with another carrier, unlike many of its competitors.
Captain Dave Bates, president of the Allied Pilots Association (APA), wrote to the organization's members that the bankruptcy filing "a truly somber occasion for the 8,000 pilots of American Airlines."
Bates wrote that pilots should not see any changes in their pay and benefits under the APA-AA collective bargaining agreement, but added, "The 18-month timeline allotted for restructuring will almost certainly involve significant changes to the airline's business plan and to our contract."
The union head noted that AA pilots have found themselves at "an airline that has lost its way.
"In 2003 American Airlines' pilots provided management with significant cost savings that were characterized as essential to avoiding bankruptcy at that time. We agreed to sacrifice based on the expectation that our airline would regain its leadership position. What has transpired since has been nothing short of a 'perfect storm.'"
Besides higher labor costs, American also struggled with rising jet fuel costs. Jet fuel cost an average of $3 per gallon so far this year - a record according to government data that goes back to 1990. The average price of jet fuel was $1.92 per gallon in 2006.
American lost $162 million in the third quarter and has lost money in 14 of the last 16 quarters.
American was the only major U.S. airline that didn't file for bankruptcy protection after the 2001 terrorist attacks."
"DALLAS - American Airlines, the nation's third largest airline, has filed for Chapter 11 bankruptcy this morning.
The Texas-based AMR Corporation, the parent company of American Airlines and American Eagle, announced that the company and certain of its U.S.-based subsidiaries (including both carriers) today filed voluntary petitions for Chapter 11 reorganization in the U.S. Bankruptcy Court for the Southern District of New York, "in order to achieve a cost and debt structure that is industry competitive and thereby assure its long-term viability and ability to continue delivering a world-class travel experience for its customers."
It says the move is in the best interest of both companies and its shareholders.
American also said its CEO Gerard Arpey will step down. He's being replaced by Thomas Horton, currently the company's president.
The Chapter 11 reorganization process would enable to airline to continue normal business operations.
AA bankruptcy won't affect fliers, company says
American said it is operating normal flight schedules, honoring tickets and reservations as usual, and making normal refunds and exchanges.
"American's customers are always 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," said Thomas W. Horton, chairman, chief executive officer and president of AMR and American Airlines.
American lost $868 million during the first nine months of this year, and was the only major U.S. airline to lose money last year.
In a press release this morning, AMR said it has approximately $4.1 billion in unrestricted cash and short-term investments, which it is said is "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."
The company's current cash position means the need for debtor-in-possession financing is not anticipated.
"Our board decided that it was necessary to take this step now to restore the Company's profitability, operating flexibility, and financial strength," said Horton. "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."
American has been unable to reach a new cost-saving contract with its pilots. It has been trying to upgrade its aging fleet of planes, and has not merged with another carrier, unlike many of its competitors.
Captain Dave Bates, president of the Allied Pilots Association (APA), wrote to the organization's members that the bankruptcy filing "a truly somber occasion for the 8,000 pilots of American Airlines."
Bates wrote that pilots should not see any changes in their pay and benefits under the APA-AA collective bargaining agreement, but added, "The 18-month timeline allotted for restructuring will almost certainly involve significant changes to the airline's business plan and to our contract."
The union head noted that AA pilots have found themselves at "an airline that has lost its way.
"In 2003 American Airlines' pilots provided management with significant cost savings that were characterized as essential to avoiding bankruptcy at that time. We agreed to sacrifice based on the expectation that our airline would regain its leadership position. What has transpired since has been nothing short of a 'perfect storm.'"
Besides higher labor costs, American also struggled with rising jet fuel costs. Jet fuel cost an average of $3 per gallon so far this year - a record according to government data that goes back to 1990. The average price of jet fuel was $1.92 per gallon in 2006.
American lost $162 million in the third quarter and has lost money in 14 of the last 16 quarters.
American was the only major U.S. airline that didn't file for bankruptcy protection after the 2001 terrorist attacks."
