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American Airlines will continue to operate flights, honor tickets and take reservations

American Airlines bankrupt

Nov 29, 2011

When checking the American Airlines website, the following warning message is posted on the AA homepage:

On November 29, 2011, AMR Corporation, the parent company of American Airlines and American Eagle, and certain of our US-based subsidiaries (including American and American Eagle) filed voluntary petitions for Chapter 11 reorganization in the US Bankruptcy Court for the Southern District of New York. We took this action in order to achieve a cost and debt structure that is industry competitive and thereby assure our long-term viability and ability to continue delivering a world-class travel experience for customers.

American Airlines' Chairman had this to say:

"American Airlines and American Eagle are operating normal flight schedules, and our reservations, customer service, AAdvantage program, Admirals Clubs, and all other operations are conducting business as usual. Likewise, throughout the Chapter 11 process, we expect to continue to:

- Provide safe and reliable service;
- Fly normal schedules;
- Honor tickets and reservations, and make exchanges and refunds as usual;
- Fully maintain our AAdvantage frequent-flyer and other customer service programs, and ensure all AAdvantage miles and elites status earned by members remain secure and intact;
- Provide Admirals Club access and similar amenities to members and eligible customers;
- Remain an integral member of the oneworld alliance, of which American is a founding member, and continue our codeshare partnerships;
- Provide employee wages, healthcare coverage, vacation, and other benefits, without interruption; and
- Pay suppliers for goods and services received during the reorganization process.

"These filings have no direct legal impact on American's operations outside the United States.

"American is committed to continuing to provide our customers with the excellent service and safe, reliable travel experience they expect from us."

In an effort to cut costs and unload massive debt, American Airlines and its parent company have filed for Chapter 11 bankruptcy protection. While American Airlines will continue to operate flights, honor tickets, and take reservations, the airline will probably reduce the amount of flights offered “modestly” and cut personnel while it restructures the company.

Saddled with an aging fleet of aircraft and high labor costs, the parent company of American Airlines filed for bankruptcy Tuesday, November 29, seeking protection from creditors while it restructures its operations.

The airline said operations would continue, all flights would depart on schedule, and that frequent flyer miles would be honored. Washington’s three regional airports reported American flights were operating on a normal schedule Tuesday.

“People need not worry about their tickets or their frequent flyer miles,” said an industry individual familiar with airline bankruptcies, an assurance reiterated by American and other officials.

American is the most recent major US carrier to face bankruptcy in an industry that has lost more than US$20 billion worldwide during the past decade. American’s parent company, AMR Corp., has suffered US$10 billion in losses since 2001.

“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,” said AMR Chief Executive Thomas W. Horton, “We must address our cost structure, including labor costs, to enable us to secure our future."

With industry profits of less than 1 percent forecast for 2012, American had little hope of a significant rebound in the coming months.

“The high price of oil and an anemic economic outlook are the biggest issues,” Tony Tyler, head of the International Air Transport Association, said in providing an industry overview prior to American’s filing, “Air cargo demand, which had been flat for more than a year, is now definitely declining. Passenger traffic has been unexpectedly resilient, but it is difficult to imagine that trend continuing in the face of rising economic uncertainty and stubborn unemployment levels.”

American sought bankruptcy court protection so that it could restructure its labor costs, airport agreements, and airplane leases to bring them in line with the rest of the major carriers. United and Delta airlines both used bankruptcy as a means to reducing their costs.

“We may trim the schedule a bit, but it will be modest,” Horton said.

Replacement of the airline’s fleet, the oldest among major carriers, will continue as planned, Horton said.

The airline recently placed record-setting orders with Boeing and Airbus for 460 planes in a deal worth more than US$38 billion.
Boeing spokesman Tim Neale said the company expected to fill the American order.

“Having new, fuel-efficient airplanes going forward is very important to their future,” Neale said, “That’s part of getting their costs in order. We have seen a number of our customers go through bankruptcy and emerge to continue operations.”

American said it has about US$4.1 billion in unrestricted cash and short-term investments. That money, and cash generated from operations, will more than pay debts owed vendors, suppliers, and business partners while the bankruptcy proceeds.

“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 said.

American Airlines bankrupt
Source: eTN and wire

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