American Airlines — and its parent company AMR Corporation — have filed for reorganization under Chapter 11 bankruptcy protection, but the company said it is still operating normal flight schedules, as well as honoring tickets and refunds.
“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 President Thomas Horton, who is also the company’s newly-appointed chairperson and CEO. “We have met our challenges head on, taking all possible action to secure our long-term position.”
AMR filed voluntary petitions for Chapter 11 in the United States Bankruptcy Court for the Southern District of New York on November 29.
The Chapter 11 process enables the company to continue conducting normal business operations while they restructure their debt, costs and other obligations. According to the U.S. Courts, Chapter 11 debtors usually seek debt relief by proposing a plan of reorganization to keep its business alive and pay creditors over time.
According to a statement released by the company, AMR has $4.1 billion in unrestricted cash and short-term investments to ensure uninterrupted supply of goods and services during the proceedings. The money allotted will go toward fully maintaining AAdvantage frequent flyer and other customer service programs, ensuring all AAdvantage miles and elites status earned by members remain secure and intact, providing employee wages, healthcare coverage, vacation and other benefits without interruption and paying suppliers for goods and services received during the reorganization process.
AMR will be filing monthly operating reports with the Bankruptcy Court and also plans to post monthly operating reports on the Investor Relations section of their website, AA.com.
“Our very substantial cost disadvantage compared to our larger competitors, all of which restructured their costs and debt through Chapter 11, has become increasingly untenable given the accelerating impact of global economic uncertainty and resulting revenue instability, volatile and rising fuel prices and intensifying competitive challenges,” Horton said.
Competitors Delta, United, Continental and US Airways have all previously filed for Chapter 11 reorganizations.
“But as we have made clear with increasing urgency in recent weeks, we must address our cost structure, including labor costs, to enable us to capitalize on [our] foundational strengths and secure our future,” said Horton.
For more information, visit AA.com/restructuring.