American Airlines forced to seek shelter from economic storm

Carrier cites fuel costs and fierce competition for bankruptcy move after three years of losses

American Airlines became the last major US carrier to file for bankruptcy protection yesterday, blaming soaring fuel costs, low-cost airlines and mergers between competitors for its woes. AMR, the parent company of American Airlines and American Eagle, the regional commuter carrier, filed for Chapter 11 protection as it sought to buy time to cut costs and reduce its mounting debts.

The group also named American Airlines' president, Thomas Horton, as the carrier's new chairman and chief executive, succeeding Gerard Arpey, who is retiring, despite being asked to stay on.

"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. Our very substantial cost disadvantage compared to our larger competitors... has become increasingly untenable given the accelerating impact of global economic uncertainty and resulting revenue instability, volatile and rising fuel prices and intensifying competitive problems."

The main competitors of American Airlines, the world's biggest carrier as recently as 2008, went into bankruptcy protection after the 11 September terrorist attacks. Among them were Delta Air Lines and United Airlines, which used bankruptcy proceedings to renegotiate staff contracts and substantially reduce their costs. They were able to cut costs further through large mergers, with Delta teaming up with Northwest and United pairing up with Continental. They have since returned to profit.

By contrast, AMR has stayed single and posted losses three years in a row, including a $471m (£301m) loss last year, rising to a $982m deficit in the first nine months of 2011.

American Airlines has also been squeezed by competitive pressure from the rise of low-cost airlines, such as Southwest Airlines, and a 50 per cent jump in fuel prices in the past five years.

Speculation that AMR might file for bankruptcy has been mounting in recent months, contributing to a 79 per cent dive in its share price so far this year.

The group said it expected to fly normal schedules throughout the Chapter 11 process and it has no plans to cancel or postpone its huge orders for new Airbus and Boeing aircraft, which are due to start arriving next year. However, the planned spin-off of American Eagle has been put on hold.

Mr Arpey retires from AMR after 30 years at the company. He joined American Airlines as a financial analyst, rising up the chain before becoming chief executive of AMR and American in 2003 and chairman a year later.

Mr Horton joined AMR in 1985, holding a range of senior financial positions before becoming president of AMR and American Airlines in July 2010.

Start your day with The Independent, sign up for daily news emails
ebooks
ebooksAn introduction to the ground rules of British democracy
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
SPONSORED FEATURES
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs Money & Business

Recruitment Genius: Field Sales Consultant - Financial Services - OTE £65,000

£15000 - £65000 per annum: Recruitment Genius: This is an exciting opportunity...

Recruitment Genius: Loan Underwriter

£18000 - £20000 per annum: Recruitment Genius: This is a fantastic opportunity...

Recruitment Genius: Collections Agent

£18000 - £20000 per annum: Recruitment Genius: This is a fantastic opportunity...

SThree: Trainee Recruitment Consultant

£20000 - £25000 per annum + competitive + incentives + uncapped comms: SThree:...

Day In a Page

The Silk Roads that trace civilisation: Long before the West rose to power, Asian pathways were connecting peoples and places

The Silk Roads that trace civilisation

Long before the West rose to power, Asian pathways were connecting peoples and places
House of Lords: Outcry as donors, fixers and MPs caught up in expenses scandal are ennobled

The honours that shame Britain

Outcry as donors, fixers and MPs caught up in expenses scandal are ennobled
When it comes to street harassment, we need to talk about race

'When it comes to street harassment, we need to talk about race'

Why are black men living the stereotypes and why are we letting them get away with it?
International Tap Festival: Forget Fred Astaire and Ginger Rogers - this dancing is improvised, spontaneous and rhythmic

International Tap Festival comes to the UK

Forget Fred Astaire and Ginger Rogers - this dancing is improvised, spontaneous and rhythmic
War with Isis: Is Turkey's buffer zone in Syria a matter of self-defence – or just anti-Kurd?

Turkey's buffer zone in Syria: self-defence – or just anti-Kurd?

Ankara accused of exacerbating racial division by allowing Turkmen minority to cross the border
Doris Lessing: Acclaimed novelist was kept under MI5 observation for 18 years, newly released papers show

'A subversive brothel keeper and Communist'

Acclaimed novelist Doris Lessing was kept under MI5 observation for 18 years, newly released papers show
Big Blue Live: BBC's Springwatch offshoot swaps back gardens for California's Monterey Bay

BBC heads to the Californian coast

The Big Blue Live crew is preparing for the first of three episodes on Sunday night, filming from boats, planes and an aquarium studio
Austin Bidwell: The Victorian fraudster who shook the Bank of England with the most daring forgery the world had known

Victorian fraudster who shook the Bank of England

Conman Austin Bidwell. was a heartless cad who carried out the most daring forgery the world had known
Car hacking scandal: Security designed to stop thieves hot-wiring almost every modern motor has been cracked

Car hacking scandal

Security designed to stop thieves hot-wiring almost every modern motor has been cracked
10 best placemats

Take your seat: 10 best placemats

Protect your table and dine in style with a bold new accessory
Ashes 2015: Alastair Cook not the only one to be caught in The Oval mindwarp

Cook not the only one to be caught in The Oval mindwarp

Aussie skipper Michael Clarke was lured into believing that what we witnessed at Edgbaston and Trent Bridge would continue in London, says Kevin Garside
Can Rafael Benitez get the best out of Gareth Bale at Real Madrid?

Can Benitez get the best out of Bale?

Back at the club he watched as a boy, the pressure is on Benitez to find a winning blend from Real's multiple talents. As La Liga begins, Pete Jenson asks if it will be enough to stop Barcelona
Athletics World Championships 2015: Beijing witnesses new stage in the Jessica Ennis-Hill and Katarina Johnson-Thompson heptathlon rivalry

Beijing witnesses new stage in the Jess and Kat rivalry

The last time the two British heptathletes competed, Ennis-Hill was on the way to Olympic gold and Johnson-Thompson was just a promising teenager. But a lot has happened in the following three years
Jeremy Corbyn: Joining a shrewd operator desperate for power as he visits the North East

Jeremy Corbyn interview: A shrewd operator desperate for power

His radical anti-austerity agenda has caught the imagination of the left and politically disaffected and set a staid Labour leadership election alight
Isis executes Palmyra antiquities chief: Defender of ancient city's past was killed for protecting its future

Isis executes Palmyra antiquities chief

Robert Fisk on the defender of the ancient city's past who was killed for protecting its future