While most of the nation was fighting off the urge to snooze into a tryptophan-induced coma following Thanksgiving dinner last November, attorneys for AMR Corporation, the parent company of American Airlines, were busy preparing the company for Chapter 11 bankruptcy.  In a follow up to that story that made holiday headlines, American Airlines recently announced that it will cut up to 14,000 jobs in an effort to lower labor costs and get out of bankruptcy.


Airlines are no strangers to the bankruptcy courtroom.  American Airlines is the third largest carrier in the United States.  The top two carriers, United and Delta, each previously sought bankruptcy relief by filing Chapter 11.  Bankruptcy can allow a company to reorganize its operations by restructuring debts and renegotiating or eliminating certain obligations.  One way to accomplish this goal is simply by downsizing its work force.  The company often remains in business during the pendency of the case with the goal of emerging from bankruptcy in a better financial position.


So, what does this restructuring mean to the average airline traveler?  It is too early to know for sure what American will do in its bankruptcy case.  Most likely, the airline will attempt to streamline its operations, restructure debts, and rework labor agreements, allowing it to be more competitive with its peers and more attractive for a potential merger.


If you have bought a ticket and are planning to fly on American Airlines in the coming year, there is little reason to worry.  The airline’s operations will be business as usual, at least in the short term.  There will be little perceptible change for now, as American has vowed to honor all reservations and even continue its frequent flyer program.  However, plans (in both travel and bankruptcy) are subject to change, and the prudent traveler should keep an eye on the process by visiting AA.com/restructuring.


The bankruptcy case is In re AMR Corp., Case No. 11-15463, filed in the United States Bankruptcy Court, Southern District of New York (Manhattan).

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