AMR, the parent company of American Airlines and American Eagle, has filed for Chapter 11 Bankruptcy today. Stating that the company holds $4.1 billion in cash, AMR plans to ensure uninterrupted service during proceedings.
The Chapter 11 process was selected by AMR’s Board of Directors in a move to continue operations while restructuring debt and other costs. American Airlines and other subsidiaries are expected to operate as normal with AMR stating that flights, reservations, customer service, AAdvantage, Admirals Clubs, as well as employee wages and benefits will not be affected.
“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 Thomas W. Horton, Chairman, CEO and President of AMR.
“We have met our challenges head on, taking all possible action to secure our long-term position. In recent years, even as the airline industry faced unprecedented challenges, American strengthened our domestic and global network; fortified our alliances with the best partners around the world; launched a transformational fleet deal that will give American the youngest and most efficient fleet in the industry; and invested in our product, service and technology to build a world class customer experience.
“But as we have made clear with increasing urgency in recent weeks, we must address our cost structure, including labour costs, to enable us to capitalize on these foundational strengths and secure our future. 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.
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“Our Board decided that it was necessary to take this step now to restore the Company’s profitability, operating flexibility, and financial strength. We are committed to working as quickly and efficiently as possible to appropriately restructure American so that it can emerge from Chapter 11 well-positioned to assure the Company’s long term viability and its ability to compete effectively in the marketplace,” Horton stated.
American filed motions today with the US Court system seeking the interim relief that it needs to stay competitive.
This announcement definitely shakes up the US airline market, but how will it affect Canadian airlines and customers? American Airlines has flights to Vancouver and Calgary with codeshare partners arriving in Victoria, Edmonton, Toronto, Ottawa, Montreal and Halifax. AMR explained that services will run undeterred, but will another company take advantage of the situation and try to fill American Airline’s shoes? It might be time for Canadian airlines to step up and prove that there are benefits in choosing Canadian when it comes to tourism and travel in Canada.