American Airlines Files for Chapter 11 Bankruptcy

FORT WORTH, Texas - AMR Corporation, the parent company of American Airlines and American Eagle filed Tuesday for Chapter 11 bankruptcy reorganization in the U.S. Bankruptcy Court in the Southern District of New York.

According to a news release from the Fort Worth-based company, all flights will continue as normal today and throughout the bankruptcy process.

AMR says its overseas operations will not be affected, and AAdvantage miles earned by customers will remain intact.

The company will delay the spin-off of its regional airline operation, American Eagle, which was expected in early 2012. AMR Eagle Holding Corp. also filed for bankruptcy.

American Airlines employs about 25,000 people in North Texas. Employees can expect wages and benefits including health care without interruption, the company said.

CEO Gerard Arpey is also retiring and will be replaced by Thomas W. Horton, Chairman and President of AMR, effective immediately.

Horton said, said, "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."

Speculation of bankruptcy widened earlier in November when the Allied Pilots Association, which had been working without a satisfactory contract for the last five years, rejected the latest contract offer from AA.

The president of the pilots' union, Dave Bates, said his members were concerned about what the bankruptcy will mean for them -- other airlines used bankruptcy to terminate pension plans.

"While today's news was not entirely unexpected, it is nevertheless disappointing that we find ourselves working for an airline that has lost its way," Bates said in a message to pilots.

Shareholders will be wiped out -- AMR shares had already tumbled 79 percent this year on bankruptcy fears. The shares closed Monday at $1.62.

American was the world's biggest airline as recently as 2008, but has fallen behind United and Delta after those two companies bought other airlines.

AMR lost $162 million in the third quarter and has posted losses in 14 of the last 16 quarters.

American was the only major U.S. airline that didn't file for bankruptcy protection in the aftermath of the 2001 terrorist attacks that triggered a deep slump in the airline industry. The last major airline to file for bankruptcy protection was Delta in 2005.

Ray Neidl, an analyst with Maxim Group LLC, said AMR was wise to file for bankruptcy while it still had about $4 billion in cash. He said the company has strong assets but needs to find labor peace and more revenue. He believes American might be pushed into a merger with US Airways.

Horton said, however, that there was no single factor that led to the bankruptcy filing. He said the company needed to cut costs in view of the weak global economy and high, volatile fuel prices. The average price of jet fuel has risen more than 50 percent in the past five years.

AMR says it has about $4.1 billion in unrestricted cash and short-term investments to pay vendors, suppliers and other business partners.

More information about American Airlines Chapter 11 filing is available on the Internet at AA.com/restructuring . Information for suppliers and vendors is available at (866) 736-9011 or (703) 286-2757, or by sending an email to amr.supplier@aa.com .