American Airlines Parent Company Files for Bankruptcy
The airline sector has taken yet another hit as the parent of American Airlines, AMR Corporation, filed for bankruptcy protection.
American Airlines, the nation’s third-largest airline, had previously avoided the bankruptcy process even when its competitors chose to file. But that position left American with higher labor costs than its rival airlines. According to AirlineForecasts, American spends $3,008 on salary and benefits for every hour each of its planes is in the air. US Airways spends $1,991 and Delta spends $2,587.
American also announced that its chairman and chief executive Gerard Arpey has stepped down and will be replaced by AMR Chairman and CEO Thomas Horton.
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“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 in a statement. “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.”
AMR plans to continue with normal operations and does not expect the bankruptcy process to affect American Airline’s frequent-flier program, but Horton did admit that American will probably “modestly” reduce its flight schedule while restructuring.
“Achieving the competitive cost structure we need remains a key imperative in this process and as one part of that, we plan to initiate further negotiations with all of our unions to reduce our labor costs to competitive levels,” Horton said.
