American Airlines Parent AMR Corporation Files for Bankruptcy
The parent company of American Airlines, AMR Corporation, announced that it filed for bankruptcy protection in order to cut employee payroll and to default on its debt. The good news is that all the legacy airlines have finally filed Chapter 11 and that American Airlines may one day return to profitability.
The company plans to operate its airlines normally as the bankruptcy process unfolds. More importantly, the airline schedule and frequent flier programs should remain in tact.
The main goal of the bankruptcy is to lower the amount of money paid to employees. The company has been in contract negotiations with its unions until earlier this month when the pilots' union did not send a proposal to members of the union for a vote. AMR is expected to negotiate a harder contract for the unions to swallow as federal bankruptcy rules allow companies to terminate the otherwise binding union contract.
American Airlines was once the true leader in the airline industry. However, the new competition from low-cost airline carriers like Southwest Airlines have taken away market share from American Airlines. Accordingly, American Airlines has lost profitability and has posted annual losses three years in a row, including a $471 million loss in 2010. Thus far this year, AMR has posted a $982 million loss through the first three quarters of 2011.
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