American Airlines goes into Chapter 11 after deal with pilots falls through

AMERICAN Airlines and its parent company AMR Corp filed for bankruptcy yesterday after failing to win a labour deal with pilots and suffering from mounting fuel costs.

AMR had been the only major US carrier to avoid bankruptcy in the past decade. Its rivals used bankruptcy to restructure their labour agreements and cut costs.

That left AMR, the third-largest US airline behind United Continental Holdings and Delta, with the highest labour costs in the industry and the only major airline still funding worker pensions.

“It completes the cycle,” said Helane Becker, an analyst with Dahlman Rose & Co. “Every major airline in the United States has filed for Chapter 11.”

In its bankruptcy filing, AMR said its cost-cutting in recent years had been insufficient and that it could not continue without changing its “uncompetitive cost structure”.

British Airway parent IAG said its partnership with AMR, “which is a revenue sharing agreement, continues to operate as usual”.

Shares of AMR, whose passenger planes average 3,000 daily US departures, have tumbled 45 per cent since the end of September.

“The world changed around us,” incoming chief executive Tom Horton told reporters on a conference call.

“It became increasingly clear that the cost gap between us and our competitors was untenable.”

Incumbent chief executive Gerard Arpey yesterday announced his retirement.

The airline said it and its regional affiliate American Eagle would continue to operate as usual, fly their normal schedules, honour reservations and make exchanges and refunds.

Shares of rival airlines rallied on expectations that fares could rise, as AMR kept a lid on industrywide fares in its effort to keep its airplanes full.

Under its Chapter 11 bankruptcy filing in a New York court, the company listed assets of $24.72bn and liabilities of $29.55bn. The company has $4.1bn in cash