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AA files for bankruptcy, says flights unaffected

AMR Corp, the parent company of American Airlines, today filed for voluntary Chapter 11 bankruptcy protection in a New York court to restructure debt.

AMR also named Thomas Horton as its chairman and chief executive, replacing Gerard Arpey, who retired, the company said in a separate statement.

The company listed assets of about $24.72 billion, while it has liabilities of $29.55 billion. The company said it has $4.1 billion in cash.

AMR said both American Airlines, which has regular flights to Bermuda, and American Eagle are expected to fly normal schedules throughout the Chapter 11 process.

"We plan to initiate further negotiations with all of our unions to reduce our labour costs to competitive levels," CEO Mr Horton said.

Labour costs are a big headache for American. Wages and benefits for its union workers are generally higher as a percentage of operating expenses than at rivals that restructured in bankruptcy in the last decade.

It remains the only major airline that still must fund worker pensions.

AMR's top rivals, UAL Corp and Delta Air Lines, which both used bankruptcy protection to slash costs, have since found merger partners. Delta bought Northwest Airlines and UAL Corp bought Continental Airlines to form United Continental Holdings.

The company said the bankruptcy has no direct legal impact on operations outside the US and that it is not considering debtor-in-possession financing.

In a statement to The Royal Gazette, American Airlines said it took this action in order to achieve a cost and debt structure that is competitive in the airline industry so that it can continue delivering a world-class travel experience for its customers.

The statement said American expects to continue normal business operations throughout the reorganisation process, and the business will continue to be operated by the Company’s management. The United States Chapter 11 reorganisation process enables a company to maintain normal business operations while it establishes a competitive cost and debt structure. This action has no direct legal impact on any American Airlines operations outside the United States.

American Airlines is operating normal flight schedules, honouring tickets and reservations as usual, and making normal refunds and exchanges. American’s AAdvantage® frequent flyer programme is not affected.

“American’s customers are always our top priority and they can continue to depend on us for the safe, reliable travel and high quality service they know and expect from us,” said Mr Horton. “American serves 260 airports in more than 50 countries and territories, and we are committed to maintaining a strong presence in worldwide markets. I am confident American will emerge even stronger as a global leader known for excellence and innovation, a travel partner customers seek out, and a carrier that serves communities throughout the world.”

More information about American Airlines Chapter 11 filing is available on the Internet at aa.com/restructuring.

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Published November 29, 2011 at 2:22 pm (Updated November 29, 2011 at 2:22 pm)

AA files for bankruptcy, says flights unaffected

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