American Airlines parent hit by bankruptcy fears (shares dive by as much as 35%)

Financial Times ^ | 10/03/2011 | Ajay Makan in New York and Mark Odell in London

[SeekAndFind]

Fears that the holding company for American Airlines, the fourth-biggest US carrier by passenger miles, will file for bankruptcy sent shares in AMR Corporation tumbling as much as 35 per cent on Monday.

Management at Fort Worth-based AMR, which owns the regional airline American Eagle as well as American strongly denied the claims.

American is the only big US carrier not to have passed through a Chapter 11 in the past decade. That has led to suggestions the company will voluntarily file for bankruptcy in order to renegotiate labour – and in particular pilot costs – despite holding a cash pile of about $5bn.

“AMR needs to get its costs down in line with the rest of the industry. That is why I suggest a pre-packaged bankruptcy filing would be the best thing,” Ray Neidl, airline and aerospace analyst at Maxim Group in New York, said.

Mr Neidl also said American Airlines was being hit harder than its peers after investors were spooked by a Bloomberg report that the number of its pilots who are retiring is running at 10 times the industry average, as they seek to protect their pensions from a possible bankruptcy filing.

An American Airlines spokesman responded that a Chapter 11 filing was “certainly not our goal or our preference”.

“We know we need to improve our results, and we have a sense of urgency as we work to achieve that,” he added.

AMR shares were trading 27 per cent lower at $2.16 by mid-afternoon in New York.

Airline stocks are highly cyclical and have been under growing pressure with fears that a US recession could hit business travel, while oil price volatility may impact on margins.

[SoftwareEngineer]

Bankruptcy is inevitable. Their unions (especially the pilots union) are actually demanding raises!!!!

No joke!

They are actually demanding as much as 35% raises and will consider a 10% raise a “defeat”

This from an airline (AA) that is bleeding over a billion dollars a year

..and people say that Unions are smart

[Don Corleone]

The Allied Pilots union is no smarter than ALPA. Both are totally myopic when it comes to seeing what their “Demands” will bring. Ever since deregulation the industry has been in turmoil.Between management not knowing (or caring) how to deal with it and the unions wanting what they always want...”MORE”...airlines have been one of the worst investment bets in the marketplace. It wouldn’t surprise me to see them nationalized in the not too distant future. Actually, they are almost that way now with all the rules, restrictions and regulations that hamper efficient operations. Just MHO!

[bestintxas]

American has been protected by 20 years of implementation of the “Wright Amendment” named after House Speaker Jim Wright of Fort Worth.

In a bid to protect the newly established DFW airport(American’s HQ) so its foothold would be strengthened to diminish the Dallas Love airport(A large SWA hub), an arbitrary law was passed that prohibited flights to/from Love except to states bordering Texas.

This law was directed at limiting SWA in favor of American.
For many years now, American has been protected from its erstwhile low cost carrier nearby.

That law is being gradually going away as Love restrictions are being lifted.

Result? Just like the time when US car manufacturers enjoyed protection from cheaper and better quality Japanese imports thru quotas, American Air is facing the music now that protections are eliminated, and many years of inefficiency are getting the exposure they needed.

Along with the car companies, this is an excellent lesson in govt-imposed mandates and how it can completely distort the marketplace as inefficient and costly behavior is masked by controls.

We do not need that in this country so let American go bye-bye to the good ol’ fashioned marketplace.

[USNBandit]

I know quite a few junior pilots (that means 12 years and still at the bottom of the list) knew they were going to lose their old school retirement. They wanted to get rid of it years ago. Unfortunately, their senior pilots run the union.

The flip side of this is that last year the company instituted a list of procedures to save money. Those included not carrying extra fuel, taxiing on one engine, using ground power instead of running APUs. At the end of the quarter the company said they saved $75 million, which they turned around the next day and gave to executives in bonuses. That didn't help labor-management relations.

[Montanabound]

Dang. I have a bunch of AA miles that I am not ready to use yet.