FORT WORTH, Texas — American Airlines’ parent
company, AMR Corp., filed for Chapter 11 bankruptcy Tuesday, and Chief
Executive Gerard Arpey has retired.
The Fort
Worth-based carrier said it will continue to operate a normal flight
schedule for American Airlines and its regional subsidiary, American
Eagle, while it is reorganizing in bankruptcy.
The airline named its current president, Tom Horton, as the company’s new chief executive.
“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,” Horton said.
He
pointed to the cost disadvantage American has compared to other legacy
carriers, such as United Continental and Delta Air Lines, both of which
went through Chapter 11 reorganization in the last decade.
AMR
said it has $4.1 billion in cash, which means it does not need to
obtain debtor-in-possession financing to maintain operations while under
bankruptcy protection.
The company has had only
two profitable years in the past decade. Its stock had slipped to an
eight-year low, closing at $1.62 on Monday.
AMR
was also facing some large debt payments. The company had $1.8 billion
due by the end of 2012. The net debt at the end of the third quarter was
$16.9 billion. And when $7.9 billion in underfunded pension benefits
and $2.5 billion in other long term liabilities are added, the company
has close to $30 billion in debt and other long-term obligations.
In
a letter sent to AMR employees Tuesday morning, Arpey said the
company’s board had asked him to stay on as chief executive but that he
chose to retire.
“After careful consideration, I
concluded that my remaining in those roles would not be best for the
company,” Arpey said in the letter. “In my view, executing the board’s
plan will require not only a re-evaluation of every aspect of our
business, but also the leadership of a new chairman and CEO who will
bring restructuring experience and a different perspective to the
process.”
Over the summer, American had announced
the largest plane order in aviation history, saying it would buy 460
planes from Airbus and Boeing with aircraft deliveries expected to start
in 2013. The massive order would replace most of its domestic fleet
with more fuel-efficient aircraft. The first 230 planes in the order
were financed through the aircraft manufacturers.
But on Tuesday morning, the company had not mentioned the order in its bankruptcy filing announcement.
The
carrier is also in contract negotiations with all of its major labor
unions. Recently, American had been in intense talks with the Allied
Pilots Association, and while the two sides had thought they were close
to a deal about a month ago, they were still far apart on issues of pay
and work rules.
“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,” Allied Pilots
Association President Captain David Bates told pilots in a message
Tuesday morning. “In 2003, American Airlines’ pilots provided management
with significant cost savings that were characterized as essential to
avoiding bankruptcy at that time. We agreed to sacrifice based on the
expectation that our airline would regain its leadership position. What
has transpired since has been nothing short of a ‘perfect storm.’ ”
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©2011 the Fort Worth Star-Telegram
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