American Airlines has filed for Chapter 11 bankruptcy
November 29th 2011 20:51
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The parent company of American Airlines has filed for Chapter 11 bankruptcy protection as it seeks to unload massive debt built up by years of accelerating jet fuel prices and labour struggles.
The move resulted in AMR shares crashing 85 per cent, or $1.38, to 24 cents in New York after being halted twice.
AMR said it sought protection to reduce its costs and debt to remain competitive. The airline says it will continue normal flight operations during the reorganisation.
The third-largest US airline also said its chief executive Gerard Arpey will step down. Hes being replaced by Thomas Horton, currently the companys president.
American was the only major US airline that didnt file for bankruptcy protection after the 2001 terrorist attacks. The last major airline to file for bankruptcy protection was Delta in 2005.
American says labour-contract rules force it to spend at least $600 million (£384 million) more than other airlines.
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.
Jet fuel is more expensive now than the average of $2.96 per gallon in 2008, when oil rose above $147 per barrel for the first time. It has risen 56.4 per cent in the past five years.
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.
The carrier said American Airlines and its American Eagle subsidiary would operate normal flight schedules. The reservations team, customer service and frequent flyer programs will all be conducting business as usual, AMR added.
The company said it would expect to ensure all AAdvantage miles and elites status remained intact. Payments to suppliers will also be maintained during the reorganisation process.
The move resulted in AMR shares crashing 85 per cent, or $1.38, to 24 cents in New York after being halted twice.
AMR said it sought protection to reduce its costs and debt to remain competitive. The airline says it will continue normal flight operations during the reorganisation.
The third-largest US airline also said its chief executive Gerard Arpey will step down. Hes being replaced by Thomas Horton, currently the companys president.
American was the only major US airline that didnt file for bankruptcy protection after the 2001 terrorist attacks. The last major airline to file for bankruptcy protection was Delta in 2005.
American says labour-contract rules force it to spend at least $600 million (£384 million) more than other airlines.
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.
Jet fuel is more expensive now than the average of $2.96 per gallon in 2008, when oil rose above $147 per barrel for the first time. It has risen 56.4 per cent in the past five years.
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.
The carrier said American Airlines and its American Eagle subsidiary would operate normal flight schedules. The reservations team, customer service and frequent flyer programs will all be conducting business as usual, AMR added.
The company said it would expect to ensure all AAdvantage miles and elites status remained intact. Payments to suppliers will also be maintained during the reorganisation process.
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