American Airlines: Bankruptcy

Update:  For those sending me private emails, no, this will not change a thing with respect to travel on American Airlines today or even next year.  If you have a ticket, it will be usable.  This is not a liquidation but, rather, a reorganization.  AMR (American Airlines) has enough short term cash holdings to exist in its present state for at least 3 years barring a dramatic change in the airline economy.  Even if there was a dramatic change that ate up cash faster, AMR could survive in its present state for at least 2 years.  Its current situation will be fundamentally different in 2 years with respect to costs as a function of labor and fleet. 

Original Post:

It’s not entirely a surprise but it isn’t entirely expected either, is it?

American Airlines has filed for Chapter 11 Bankruptcy protection and Chairman and CEO Gerard Arpey is “resigning”.

Digest that for a minute.

We’ll be seeing some people say “they knew all along it would happen now” and we’ll be seeing others expressing deep shock.  If you followed American Airlines, you knew this was a possibility.  I think few of us expected this to happen this month, this year or in the next 6 months.  Not really. 

But it isn’t the *wrong* thing to do.  By doing this now, American gets its house in order and they do it while there is ample cash holdings to accomplish it.  This isn’t being done because American is out of money or can’t meet some obligation. 

It’s being done, primarily, to break labor contracts and gets its costs aligned with that of the other SuperLegacy airlines.

By doing it now, American gets to be in control of its destiny much more than by waiting to until cash holdings become somewhat critical and creditos get antsy.  Want proof of that?

Look who just got named Chairman and CEO of American Airlines:  Tom Horton.

My first reaction is that Tom Horton is *not* the person to be put in charge of reorganizing American Airlines (and AMR).  My second reaction is that maintaining the executive corps and the status quo is *not* what you want to be doing at this point. 

American isn’t having a tougher and tougher time of things simply because of what pilots earn.   That’s part of it and labor costs in general are a big part of their troubles.

The biggest problem?  American Airlines increasing irrelevancy to the consumer and its exceptionally decreased value to that consumer when compared to both SuperLegacy and LCC carriers. 

Evolution in AA leadership is going to be very unsatisfying.  A little more Revolution is what is called for.  Tom Horton & Company aren’t that, I believe, but they are free to prove me violently wrong.

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One Response to “American Airlines: Bankruptcy”

  1. AA Must Die.

    -R

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