On November 28, 2011 American Airlines filed for bankruptcy protection under chapter 11. The filing by the AMR Corp. and its subsidiaries, including, but not limited to, American Airlines and American Eagle, resulted from unsuccessful attempts to win labor concessions. The bankruptcy filing listed $24.7 billion in assets and $29.6 billion in liabilities or debts.
The filing allows American to continue normal business operations during the restructuring. At the hearing, the bankruptcy court approved the debtor's requests to pay its employees, resume with its customer programs, and pay vendors critical to maintaining its daily business operations.
It seems clear that the cost gap between the airline and its competitors was indefensible. It is also clear that since 9/11, the economic climate has been most uncertain, oil prices remain high and volatile, which may have ultimately caused American Airlines to file for bankruptcy protection.
In the court papers, the company listed as its unsecured creditor Wilmington Trust Corp., which is the trustee for holders of $460 million in 6.25 percent convertible senior notes due in 2014. On September 27, 2011, the company sold $725.7 million of 10-year bonds backed by aircraft to refinance maturing debt. Also, this debtor paid the highest interest rates since 2009 to raise the cash.
Hopefully, with the economic recession coming to an end, the airlines can recover from the bear market that we are facing at this time.
