American Airlines has filed for voluntary bankruptcy, promising to maintain current services while it attempts to restructure its “cost and debt structure” into a manageable form. The airline’s parent company, AMR Corporation, filed for Chapter 11 reorganization in the US today, a process that can take anything from months through to years: in the meantime, it will operate normal flight schedules, make refunds and exchanges as usual, and honor all existing tickets and reservations.
AA also says it will be paying staff as usual, as well as suppliers, and the various loyalty and airmiles programs will continue to run as normal. “As we have made clear with increasing urgency in recent weeks, we must address our cost structure, including labor costs, to enable us to capitalize on [our] foundational strengths and secure our future” CEO Thomas W. Horton said in a statement today. “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.”
The airline has made several technological investments over recent months in an attempt to cut costs and boost AA’s appeal with travelers. Back in June, the company announced a deal with Samsung to replace in-seat entertainment screens with custom Galaxy Tab 10.1 tablets, while Gogo Vision will see streaming TV and movie media brought onboard.
AMR claims it has around $4.1bn in unrestricted cash and short-term investments, which – along with ongoing income from operations – it claims will be more than sufficient to pay its ongoing costs. Meanwhile, it will file monthly Chapter 11 reports to try to keep investor reassured. More on Chapter 11 bankruptcy here, for those interested, and details on AA’s process here.