American Airlines' parent company, AMR Corp., filed for Chapter 11 bankruptcy on Tuesday morning and its chief executive Gerard Arpey has retired.
The Fort Worth-based carrier said it will continue to operate a normal flight schedule for American Airlines and its regional subsidiary, America Eagle, while it is reorganizing in bankruptcy.
The airline named its current president, Tom Horton, as the company's new chief executive.
“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.
He pointed to the cost disadvantage American has compared to other legacy carriers, such as United Continental and Delta Air Lines, both who went through Ch. 11 reorganization in the last decade.
AMR said it has $4.1 billion in cash and as a result, does not need to obtain debtor-in-possession financing to maintain operations while under bankruptcy protection.
The company has had only two profitable years in the past decade, its stock has slipped to an eight-year low, closing at $1.62 on Monday.
AMR was also facing some large debt payments. The company had $1.8 billion due by the end of 2012. The net debt at the end of the third quarter was $16.9 billion.
And when $7.9 billion in underfunded pension benefits and $2.5 billion in other long-term liabilities are added, the company has close to $30 billion in debt and other long-term obligations.
In a letter sent to AMR employees on Tuesday morning, Arpey said the company's board had asked him to stay on as chief executive but that he chose to retire.
“After careful consideration, I concluded that my remaining in those roles would not be best for the company,” Arpey said in the letter. “In my view, executing the Board's plan will require not only a reevaluation of every aspect of our business, but also the leadership of a new Chairman and CEO who will bring restructuring experience and a different perspective to the process.”
Over the summer, American had announced the largest plane order in aviation history, saying it would buy 460 planes from Airbus and Boeing with aircraft deliveries expected to start in 2013.
The massive order would replace most of its domestic fleet with more fuel-efficient aircraft. The first 230 planes in the order were financed through the aircraft manufacturers.
However, on Tuesday morning, the company had not mentioned the order in its bankruptcy filing announcement. The carrier is also in contract negotiations with all of its major labor unions. Recently, American had been in intense talks with the Allied Pilots Association and while the two sides had thought they were close to a deal about a month ago, they were still far apart on issue of pay and work rules.
“While today’s news was not entirely unexpected, it is nevertheless disappointing that we find ourselves working for an airline that has lost its way,” APA president Captain David Bates told pilots in a message on Tuesday morning.
“In 2003 American Airlines’ pilots provided management with significant cost savings that were characterized as essential to avoiding bankruptcy at that time. We agreed to sacrifice based on the expectation that our airline would regain its leadership position. What has transpired since has been nothing short of a “perfect storm.”
The company is holding a press conference at its Admirals Club at Dallas/Fort Worth Airport at 10 a.m.
© 2011 Fort Worth Star-Telegraph
© 2011 McClatchy-Tribune Information Services
Truthout has licensed this content. It may not be reproduced by any other source and is not covered by our Creative Commons license.
We’re not backing down in the face of Trump’s threats.
As Donald Trump is inaugurated a second time, independent media organizations are faced with urgent mandates: Tell the truth more loudly than ever before. Do that work even as our standard modes of distribution (such as social media platforms) are being manipulated and curtailed by forces of fascist repression and ruthless capitalism. Do that work even as journalism and journalists face targeted attacks, including from the government itself. And do that work in community, never forgetting that we’re not shouting into a faceless void – we’re reaching out to real people amid a life-threatening political climate.
Our task is formidable, and it requires us to ground ourselves in our principles, remind ourselves of our utility, dig in and commit.
As a dizzying number of corporate news organizations – either through need or greed – rush to implement new ways to further monetize their content, and others acquiesce to Trump’s wishes, now is a time for movement media-makers to double down on community-first models.
At Truthout, we are reaffirming our commitments on this front: We won’t run ads or have a paywall because we believe that everyone should have access to information, and that access should exist without barriers and free of distractions from craven corporate interests. We recognize the implications for democracy when information-seekers click a link only to find the article trapped behind a paywall or buried on a page with dozens of invasive ads. The laws of capitalism dictate an unending increase in monetization, and much of the media simply follows those laws. Truthout and many of our peers are dedicating ourselves to following other paths – a commitment which feels vital in a moment when corporations are evermore overtly embedded in government.
Over 80 percent of Truthout‘s funding comes from small individual donations from our community of readers, and the remaining 20 percent comes from a handful of social justice-oriented foundations. Over a third of our total budget is supported by recurring monthly donors, many of whom give because they want to help us keep Truthout barrier-free for everyone.
You can help by giving today. Whether you can make a small monthly donation or a larger gift, Truthout only works with your support.