American Airlines files for bankruptcy

Tue Nov 29, 2011 2:36pm EST
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By Kyle Peterson and Matt Daily

(Reuters) - American Airlines, the third-largest U.S. carrier, and its parent AMR Corp filed for bankruptcy protection on Tuesday to cut labor costs in the face of high fuel prices and dampened travel demand.

AMR, which replaced its chief executive in the move, had been mired for years in fruitless union negotiations, complaining all the while that it shoulders higher labor costs than rival domestic and foreign carriers that have already restructured in bankruptcy.

American Airlines, once the largest U.S. carrier, is now third behind United Continental Holdings Inc's United Airlines and Delta Air Lines Inc, both of which used Chapter 11 to cut costs and later found merger partners.

"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," he said.

AMR named Horton as chairman and chief executive, replacing Gerard Arpey, who retired.

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

American Airlines hopes bankruptcy will cut labor costs, but analysts question whether restructuring under Chapter 11 of U.S. Bankruptcy Code will address operational shortcomings and bolster revenue.   Continued...