The parent company for American Airlines and American Eagle, AMR, has filed for bankruptcy, claiming that the filing is necessary to slash the company's costs while remaining competitive in the airline market, as reported by Courthouse News Service and other news media.
Allegedly every other legacy airline has filed for bankruptcy in the wake of the 9-11 disaster, with AMR being the last. Many of the bankruptcies have allowed other airline companies to return to profitability.
With the filing came news of the share price dropping from $1.62 to 26 cents a share, and CEO G.A. had been replaced by company president T.H.
Prior to the bankruptcy announcement AMR was traded for as much as $8.85 a share this past January.
A statement that the airlines "are operating normal flight schedules today, and their reservations, customer service, AAdvantage program, Admirals Clubs and all other operations are conducting business as usual" was also made public the day of the filing.
For the last 16 quarters - the company was in the red for 14.
T.H. said that other airlines that had already restructured through bankruptcy filings were doing better than AMR, while AMR had been running at a substantial cost disadvantage.
The last large airlines to file for bankruptcy protection was Delta in 2005, while United and US Airways had filed in 2002.
D.H. said that the disadvantage faced by AMR "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 had been in negotiations over new labor contracts - which had failed to be agreed upon - just before the bankruptcy was announced.
Of the $4.1 billion in unrestricted cash and short-term investments, the company said, "This cash, as well as cash generated from operations, is anticipated to be 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 in accordance with customary terms. Because of the company's current cash position, the need for debtor-in-possession financing is neither considered necessary nor anticipated."
The leading unsecured debts, ranging from the highest at $460,000,000 to the least at $17,855,000 are owed respectively to: Wilmington Trust, Manufacturers and Traders Trust Company, Law Debenture Trust Company of New York, The Bank of New York Mellon, US Bank NA, Hewlett Packard, Miami Dade County and Rolls-Royce Inc.
Many of the creditors listed above are named more than once - some up to three times - with decreasing amounts. These included Wilmington Trust, Manufacturers and Traders Trust Company, Law Debenture Trust Company of New York, The Bank of New York Mellon.
AMR continues to serve over 50 countries in 260 airports. The average number of flights per day is 3,300.
If you are considering a personal or business bankruptcy, contact a bankruptcy attorney to best suit your needs and to help you with your filing.