AMR Declares Bankruptcy

AMR, the parent corporation of American Airlines, has filed for bankruptcy, the last of the large, established U. S. airlines to do so:

The company says it intends to operate normally throughout the bankruptcy process, as previous airlines have done, and does not expect the restructuring to affect American’s flight schedule or frequent flier programs.

“Our board decided that it was necessary to take this step now to restore the company’s profitability, operating flexibility and financial strength,” Thomas W. Horton, who was named the company’s chairman and chief executive on Tuesday, said in a statement. Mr. Horton, formerly the company’s president, is succeeding Gerald Arpey, who is retiring.

One of AMR’s chief goals in bankruptcy will be to lower its labor costs.

The proximate cause of the filing is the failure of talks with the company’s unions. However, as with the automobile industry, the banking industry, and so many others of the industries that are being propped up by the federal government, the big airlines have made a lot of bad management decisions over a lot of years. Ten years ago I wrote to my Congressman and my senators complaining about it. You can’t keep poorly run companies operational indefinitely and trying to do so squeezes out upstart competitors.

When you try to stop the process of creative destruction you get—nothing. And nothing is what we’re getting.

1 comment… add one
  • You are entirely correct. AMR has failed, and everyone should view this bankruptcy filing that way. There’s nothing “strategic” about bankruptcy, except trying to figure out how to wipe out shareholders along the way toward extending a failed strategy and really bad management.

    AMR is an example of a company with customers that largely hate it, employees that are beleaguered and competitors that match its every cost-cutting move to maintain all out price wars as they commodotize the service and eliminate the profits. Who wins in this scenario? Hard to even say the customers do – and certainly not investors.

    Great insights to what’s wrong at AMR and the largest airline companies at Forbes magazine “Yes AMR, Bankruptcy IS Failure”

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