Although Horton said American “may trim the schedule a bit, but it will be modest,” Cordle said that if fuel costs stay high, the airline may need to cut service.
“I can only assume they’re going to have to do something to stem the gushing red ink, and that’s going to be to pull down some capacity,” Cordle said.
American Airlines parent AMR Corp. filed for bankruptcy after failing to secure cost-cutting labor agreements and sitting out a round of mergers that dropped it from the world's largest airline to No. 3 in the U.S. With the filing, American became the final large U.S. full-fare airline to seek court protection from creditors. Chairman Gerard Arpey will retire and be replaced by Thomas Horton, AMR said.
Though Horton said it was not the final straw, negotiations with pilots and workers over cost-cutting contracts were not making progress. The unions are seeking to regain some of the $1.6 billion in concessions they made to save the company from bankruptcy in 2003. The company’s labor expenses were reported to be about $800 million a year more than those of its competitors.
American has $16 billion in health and pension obligations to employees and retirees, and $5.5 billion of that amount is unfunded.
“Labor is going to be the largest unsecured creditor at the table,” Cordle said.
‘Change is never easy’
Horton took the reins of AMR on Monday, elevated by the board after his predecessor, Gerard Arpey, opted to retirerather than lead the company through the bankruptcy.
In a written message to AMR employees, Horton said that “we expect to continue to provide employee wages, health-care coverage, vacation, and other benefits, without interruption.”
He wrote, “I realize this news might be difficult to absorb. Change is never easy.”
Replacement of the airline’s fleet, the oldest among major carriers, will continue as planned, Horton said.
The airline recently placed record-setting orders with Boeing and Airbus for 460 planes in a deal worth more than $38 billion.
Boeing spokesman Tim Neale said the company expected to fill the American order.
“Having new, fuel-efficient airplanes going forward is very important to their future,” Neale said. “That’s part of getting their costs in order. We have seen a number of our customers go through bankruptcy and emerge to continue operations.”
AMR said it has about $4.1 billion in unrestricted cash and short-term investments. That money, with cash generated from operations, will more than pay debts owed vendors, suppliers and business partners while the bankruptcy proceeds, the company said.
The Post Most: LocalMost-viewed stories, videos and galleries int he past two hours
Loading...
Comments