Chapter 11 Bankruptcy
November 29, 2011 by staff
Chapter 11 Bankruptcy, AMR Corp. (NYSE:AMR), the parent company of American Airlines, Monday filed for Chapter 11 bankruptcy protection after failing to win a deal with pilots to cut labour costs earlier in November.
Premarket, shares fell 62 percent on the news. The stock closed Monday at $1.62 and is down 82 percent for the year to date.
In a statement, the company said: “American took this action in order to achieve a cost and debt structure that is competitive in the airline industry so that it can continue delivering world-class travel experience for its customers.”
American Airlines, which serves 260 cities through a network that reaches 50 countries, said its flights would operate normally and the company will honor tickets and reservations as usual, and that its code-shares and frequent flyer program were not affected.
Rumors had swirled for months that AMR would file for bankruptcy protection, after a spike in pilot retirements, with the pilots trying to sell their holdings in AMR stock.
AMR’s top rivals, UAL Corp – parent of United Airlines – and Delta Air Lines, which both used bankruptcy to cut costs, have since found merger partners. Delta purchased Northwest Airlines and UAL Corp. bought Continental Airlines to form United Continental Holdings (NYSE:UAL).
In its Chapter 11 filing in a New York court, the company listed assets of about $24.72 billion, while it has liabilities of $29.55 billion. The company said it has $4.1 billion in cash.
The airline said last month it was also suffering from soaring fuel prices that sent its costs 40 percent higher in the third quarter from a year earlier.
AMR also named Thomas Horton as its chairman and chief executive, replacing Gerard Arpey, who retired, the company said in a separate statement.
“We are committed to maintaining a strong presence in worldwide markets. I am confident American will emerge even stronger 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 said.
In July, American Airlines, which with sister American Eagle has a fleet of 900 planes, announced a massive order for aircraft divided between Boeing (NYSE:BA) and Airbus, owned by European aerospace company EADS.
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