On November 29, 2011, the parent company of American Airlines announced that it was filing for bankruptcy protection under Chapter 11. The move does not come as a surprise, as all the major US competitors of American Airlines, including United Airlines and Delta Airlines sought relief from debt under the bankruptcy law years ago (in 2002 and 2005, respectively).
American Airlines, along with its regional affiliate American Eagle are struggling with heavy debt accumulated as a result of rising fuel costs, decreasing sales and labour struggles. Once the largest US carrier, Americal Airlines is now third, behind its two main rivals who used Chapter 11 in order to restructure their business, reduce costs and merge with smaller airlines in order to gain scale. “The world changed around us,” American Airlines newly appointed Chief Executive Tom Horton declared. And it sure did! While its competitors were getting stronger, the airline was struggling with high costs and endless negotiations with labour unions.
By filing for bankruptcy, American Airlines is hoping to restructure its operations while continuing to operate normally. The company will probably reduce capacity, change its routes, cut labour and operational costs. It may shrink in size, but it will probably come out stronger and more competitive.