American Airlines files for bankruptcy; CEO Arpey steps down
Published: November 29, 2011
American Airlines 737-800. Courtesy, AA
American Airlines’ (AA) parent AMR Corp. filed for Chapter 11 bankruptcy protection in a New York court Tuesday and announced the resignation of chairman and CEO Gerard Arpey.
President Tom Horton will assume the roles of chairman and CEO and oversee the company’s reorganization. AMR’s board of directors said in a statement that filing for Chapter 11 was necessary “to achieve a cost and debt structure that is industry competitive and thereby assure [AA's] long-term viability.” The company vowed that AA and regional affiliate American Eagle would “continue conducting normal business operations while they restructure their debt, costs and other obligations.”
Dallas-based AA was the sole US major international airline to avoid filing for bankruptcy in the turbulent 2001-2005 period that followed the Sept. 11 terrorist attacks. Horton said AA has been at a cost disadvantage to its rivals ever since and has done all it can to revive its finances outside the bankruptcy process. The carrier has incurred losses in four straight quarters even as other US airlines have returned to the black ( ATW Daily News, Oct. 20 ).
“We must address our cost structure, including labor costs, to enable us to capitalize on [AA's] foundational strengths and secure our future,” Horton said. “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.”
AMR said it has approximately $ 4.1 billion in unrestricted cash and short-term investments available. Coupled with revenue from continuing operations, the cash “is anticipated to be more than sufficient to assure that [AA's] vendors, suppliers and other business partners will be paid timely and in full for goods and services,” the airline stated. “Because of the company’s current cash position, the need for debtor-in-possession financing is neither considered necessary nor anticipated.”