American Airlines files for bankruptcy protection

BY Staff and Wire Reports
Tuesday, November 29, 2011
11/29/11 at 3:31 PM

Continuing Coverage: See all of the American Airlines coverage, including the journey to bankruptcy and a timeline of the company’s history in Tulsa.

The parent companies of American Airlines and its regional affiliate American Eagle are filing for Chapter 11 bankruptcy protection.

Fort Worth, Texas-based AMR Corp. and AMR Eagle Holding Corp. said Tuesday that they filed voluntary petitions to reorganize, saying it's in the best interest of the companies and its shareholders.

American, which traces its roots to 1920s air-mail operations in the Midwest, listed $24.7 billion in assets and $29.6 billion in debt in papers filed in U.S. Bankruptcy Court in Manhattan.

American says it sought protection to reduce its costs and debt to remain competitive in the airline industry.

American was the only major U.S. airline that didn't file for bankruptcy protection after the 2001 terrorist attacks.

American says labor-contract rules force it to spend at least $600 million more than other airlines.

American Airlines operates its largest maintenance base in Tulsa. It employs about 7,000 workers in the city.

In a press release, American officials said they have $4.1 billion in cash that would allow for the uninterrupted supply of goods and services during the bankruptcy.

"AMR’s board of directors determined that a Chapter 11 reorganization is in the best interest of the company and its stakeholders," AMR leaders said in the press statement. "Just as with the company’s major airline competitors in recent years, the Chapter 11 process enables American Airlines and American Eagle to continue conducting normal business operations while they restructure their debt, costs and other obligations.

"American Airlines and American Eagle are operating normal flight schedules today, and their reservations, customer service, AAdvantage program, Admirals Clubs and all other operations are conducting business as usual."

American and Eagle expect to continue to fly normal schedules, honor tickets and reservations, and make exchanges and refunds as needed; maintain AAdvantage frequent flyer and other customer service programs; and ensure all AAdvantage miles and elites status earned by members remain secure and intact; officials said.

They also said American would continue to provide employee wages, health care coverage, vacation, and other benefits, without interruption; and pay suppliers during the reorganization process.

American has a number of suppliers and other businesses doing contract work that are located in the Tulsa area.

In a separate announcement, AMR said it had appointed Thomas Horton as chairman and CEO, succeeding Gerard Arpey in those positions. Arpey has retired. Horton will retain the title of president.

“This was a difficult decision, but it is the necessary and right path for us to take – and take now – to become a more efficient, financially stronger, and competitive airline," Horton said in the press release.

“We have met our challenges head on, taking all possible action to secure our long-term position. In recent years, even as the airline industry faced unprecedented challenges, American strengthened our domestic and global network; fortified our alliances with the best partners around the world; launched a transformational fleet deal that will give American the youngest and most efficient fleet in the industry; and invested in our product, service and technology to build a world class customer experience."

Horton said the board decided that it was necessary, however, to file Chapter 11 reorganization to restore the company's profitability, operating flexibility and financial strength.

"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,” Horton stated.

Speaking at a press conference Tuesday, John Hewitt, chairman of maintenance for Transport Workers Union Local 514, said the news came in spite of the sacrifices made in 2003 in regards to wages and work rules to avoid a bankruptcy filing.

"Regrettably, today we woke up to bad news,” Hewitt said. “We were informed that American Airlines filed for Chapter 11 protection in New York to protect the company. We are very disappointed that AMR has chosen this path, especially because our union has worked with the company to make it more cost competitive and more efficient."

Hewitt said the TWU will file claims on behalf of its members and will protect the income, benefits and careers of its members.

"Bankruptcy has never been an advantage to the workforce,” he said. “The pay, benefits and job security of all of our members and other unions at AA will likely be a major target of this process. However, in many respects, we are below industry standards in those areas."

Tulsa civic leaders encouraged the local community to rally around American.

"Perhaps more than ever, our largest employer and our friends and neighbors need support from the business community and area elected officials," said Mike Neal, president and CEO of the Tulsa Metro Chamber.

Neal said it is too early to speculate, but a Chapter 11 filing to reorganize American Airlines potentially has untold impact in the Tulsa region and would reverberate throughout the entire economy.

The chamber, he said, will remain in regular contact with officials at the local maintenance base, as well as other city, business and legislative leaders, to see what help can be provided during the reorganization.

Tulsa mayor Dewey Bartlett says the city will continue to strengthen its ties with American and continue to support the company that has a long history of working with its union representation.

"The company will go through a long process that could strengthen its core operations in the long term," Bartlett said. "Time will tell the outcome of all of AMR business operations, but I remain positive that Tulsa's maintenance operations are a strong component of its business.

"American officials have assured us that business prospects remain strong and existing contracts for new orders will remain in place."

More information about American Airlines Chapter 11 filing is available on the Internet at AA.com/restructuring. Information for suppliers and vendors is available at (866) 736-9011 or (703) 286-2757, or by sending an email to amr.supplier@aa.com.

Associated Images:

Workers assemble airplane seats at the American Airlines Maintenance and Engineering Center in Tulsa on Tuesday, April 26, 2011. MATT BARNARD / Tulsa World

A American Airlines plane taxis in front of the American Airlines Maintenance facility at Tulsa International Airport on May 24, 2011. TOM GILBERT / Tulsa World

James Jespersen, an avionics technician, works at the American Airlines Maintenance and Engineering Center in Tulsa on Tuesday, April 26, 2011. MATT BARNARD / Tulsa World

A patrially-disassembled jet engine awaits completion at the American Airlines Maintenance and Engineering Center in Tulsa on Tuesday, April 26, 2011. MATT BARNARD / Tulsa World

Switches and lights fill the cockpit of an American Airlines 737 at the American Airlines Maintenance and Engineering Center in Tulsa on Tuesday, April 26, 2011. MATT BARNARD / Tulsa World