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The next steps for American Airlines

Steve Chiotakis Nov 29, 2011

Steve Chiotakis: The parent company of American Airlines — AMR — today filed for Chapter 11 bankruptcy protection, saying the airline has more debt than assets and that it needs restructuring if it’s going to survive. American says none of its
flight operations are affected by the bankruptcy, and some analysts say this is a strategic move to make the airline more competitive.

Helane Becker is an airline analyst from the firm Dahlman Rose and she’s with us now. Good morning.

Helane Becker: Hi, good morning. How are you?

Chotakis: I’m doing well. Is American really — bankruptcy, obviously is a serious thing — but is it really in trouble.

Becker: Yeah. They have a revenue problem, they have a cost problem. I mean, they haven’t made money in four years. They are definitely in trouble.

Chotakis: What does American do now? Will it survive? Is it going to get through this?

Becker: Immediately, today, they go into court and they file what’s called first-day motion. They ask to be able to pay their fuel suppliers, their employees, and so on. And so their plans don’t get arrested while they’re outside the country. They continue to do business as usual — there’s nothing as a customer you would notice any changes.

What they need to do now is figure out what aircraft they want to keep, get rid of the aircraft they don’t, renogiate leases on the ones they do and then they reset the stage on all the labor negotiations as they endeavor to lower their cost of doing business.

Chotakis: Helane Becker is an airline analyst with Dahlman Rose. Helane, thanks.

Becker: My pleasure, thanks.

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