American Airlines Files for Bankruptcy Protection

One of the last major airline companies in the United States to avoid Chapter 11 has finally decided to restructure to begin anew. AMR Corp., the parent company of American Airlines announced that it has filed for bankruptcy protection.

According to the company, the reason for the bankruptcy filing is high labor costs as well as the unstable economy. One of the main goals that the company is aiming for out of its bankruptcy proceedings is lowered labor costs. The company has recently been in talks with labor unions, but those talks were stopped earlier this month.

Until last Tuesday when it filed for bankruptcy protection, the airline was the last major carrier network in the United States to avoid bankruptcy since the September 11 attacks. Many of American Airlines’ competitors have dealt with their financial difficulties by dealing directly with labor problems. They have renegotiated labor contracts, and restructured debt by consulting with California bankruptcy attorneys. Some of these airlines have been able to turn their balance sheets around since then, reporting solid profit margins.

AMR Corp. declared a net loss of $804 million in the first 9 months of 2011. That was more than double the company's losses during the same time last year. Another factor in the company’s financial troubles has been increased competition in the airline industry. In recent years, competitors like Southwest Airlines have grabbed a major slice of market share. In order to meet competition, the company was forced to increase its borrowing, pledging all assets, leaving it heavily in debt.

According to the company, the airline will function as normal throughout the bankruptcy and restructuring process. Passengers are not expected to be affected by the bankruptcy proceedings. All flights will operate as scheduled, and all frequent flyer programs will be honored.