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American Airlines files for bankruptcy protection
Question of the Day
DALLAS (AP) — The parent company of American Airlines filed for bankruptcy protection Tuesday, seeking relief from crushing debt caused by high fuel prices and expensive labor contracts that its competitors shed years ago.
The company also replaced its CEO, and the incoming leader said American probably would cut its flight schedule “modestly” while it reorganizes. He did not give specifics. American said its frequent-flier program would be unaffected.
AMR Corp., which owns American, was the only major U.S. airline company that did not file for bankruptcy protection after the Sept. 11 attacks, which caused a deep slump in the industry.
Bankruptcy filings allowed American’s competitors to shed costly labor contracts, unburden themselves of debt and start making money again. American was stuck with higher costs and had to match its competitors’ lower fares or lose money.
Other airlines also grew by pursuing acquisitions and expanding overseas. American was the biggest airline in the world in 2008 but has been surpassed by United, which combined with Continental, and Delta, which combined with Northwest.
Delta was the last major airline to file for bankruptcy protection, in 2005.
Mr. Horton said the board of directors unanimously decided to file for bankruptcy after meeting Monday in New York and again by conference call on Monday night.
In a filing with federal bankruptcy court in New York, AMR said it had $29.6 billion in debt and $24.7 billion in assets.
In addition to reducing the flight schedule, Mr. Horton said, there probably would be corresponding job cuts. American has about 78,000 employees and serves 240,000 passengers per day.
The company will delay the spinoff of its regional airline, American Eagle, which was expected early next year. The holding company for that airline also filed for bankruptcy.
AMR stockholders will be wiped out. The stock has lost 79 percent of its value this year on fears of bankruptcy. The stock fell to 33 cents Tuesday morning, down $1.29 from the day before.
The stock rose from about $1.50 in 2003 to more than $40 in 2007.
Speculation about an AMR bankruptcy grew in recent weeks as labor negotiations with pilots and other workers seemed to stall. The company said it was spending $600 million more a year than other airlines because of labor-contract rules.
On Tuesday, Mr. Horton said no single factor led to the bankruptcy filing. He said the company needed to cut costs because of the weak global economy and high, volatile fuel prices. The price of jet fuel has risen more than 60 percent in the past five years.
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