American Airlines, one of the top airlines in the U.S., along with its parent company AMR Corp, filed for Chapter 11 bankruptcy this Tuesday. This step was considered necessary to reduce labor costs amid rising fuel prices and falling travel demand.
For years, American Airlines has dealt with high employee costs while other domestic and international airlines have managed to restructure these expenses through bankruptcy. It became apparent that the company could not make the needed cost cuts without declaring bankruptcy.
Despite filing for Chapter 11, American Airlines still has about $4.1 billion in cash. This type of bankruptcy allows a company to work out a reorganization plan with its creditors. However, American Airlines has not yet finalized its reorganization plan.
Some industry experts are concerned whether Chapter 11 can really fix the operational problems affecting the airline’s revenue. They believe there might be other challenges that need addressing.
As the busy travel season approaches, the airline has assured customers that its operations will not be disrupted. There will be no changes to flight schedules, reservations will be honored, and refunds and exchanges will be processed as usual. Frequent flyer miles will also remain intact. American Eagle, American Airlines’ regional partner, has also committed to continuing normal operations.