The parent company of American Airlines and American Eagle, the Ft. Worth, Texas-based AMR Corporation, announced Tuesday it has filed for Chapter 11 reorganization in U.S. Bankruptcy Court. However, passengers need not be concerned.
American Flight Schedule: ‘Business as Usual’
According to air travel analyst Rick Seaney, “If you’re waking up this morning thinking, ‘but what about my holiday airfare on American?’ do not worry; your ticket is safe.” Seaney added, “We have seen bankruptcy filings from all the major legacy airlines over this past decade with minimal flight disruptions.”
Listen to this analysis of the American Airlines bankruptcy which explains what it means for passengers:
A spokesperson for AMR, quoted by CBS News, said the move to bankruptcy was in the best interests of the airlines and its shareholders, “in order to achieve a cost and debt structure that is industry competitive and thereby assure its long-term viability and ability to continue delivering a world-class travel experience for its customers.” American was the only legacy carrier to lose money last year, and has lost a reported $860+ million in the first nine months of this year alone.
In the meantime, American’s CEO Gerard Arpey is leaving, and will be replaced by current AA president Thomas Horton.
American’s Problems: What Led to Bankruptcy
Like all the airlines, American has been challenged by rising fuel costs over the past few years, including the rising cost of refining oil into jet fuel. And although the carrier was the second highest collector of bag fee money this year (after Delta), it apparently wasn’t enough.
Unlike many of its big competitors though, American has been a bystander during a recent series of mergers/acquisitions that has seen Delta‘s takeover of Northwest, United‘s merger with Continental and Southwest‘s acquisition of AirTran.
And while American recently announced an ambitious program of upgrading its fleet, it has so far been unable to reach an agreement on a new contract with its pilots.
Meanwhile, although the bankruptcy announcement may be giving some consumers pause on whether to buy American Airline tickets or not, such hesitation in the short term may actually drive the carrier’s prices down a bit, at least on airfares for departures after the holidays.