Kal Korff

American Airlines Parent Firm Files for Bankruptcy

by Kal K. Korff
Internationally Syndicated Copyright 2011 by Kal K. Korff - ALL RIGHTS RESERVED.

American Airlines (AA), via the parent company ARM, headquartered in Chicago, has filed for Chapter 11 bankruptcy, citing $29.6 billion in debts against $24.7 billion in assets, with just over $4 billion in cash on hand. The sudden move rocked shareholders of the company, whose stock price has steadily declined during the past several years. AA was once the United States largest airline. It was also one of the industrys early visionary pioneers and championed many innovations over the past several decades which passengers take for granted today. Its initial focus, before adding worldwide routes, was optimised travel inside the American continent. Like many airlines, AA started by delivering mail, just as the Boeing aircraft company did. After cementing that niche, the airlines branched out to carrying passengers and even launched the concept of what is today known as economy class. Among the other innovations, AA created the first dedicated school to training airline stewardesses. It invented curbside check-ins, now a standard copied by everyone in the industry today. During the heyday under the leadership of its former CEO Robert Crandall, AA partnered with other carriers, allowing flexibility in travel. If its planes were full, even rival airlines would take AA tickets. The airlines also introduced the frequent flyer mileage program, again another standard all major competitors use. Under Crandalls vision, American Airlines created the modern day flight hubs which are now emulated at all airports worldwide. By exercising this move, they lowered costs, cut salaries and jobs, everywhere except at AA, whose expenses in their day-to-day operations continued to rise. Competitor airlines which emerged from bankruptcy protection eliminated retirement pensions and other expensive union demanded perks, costs which AA still pays today

because it has retirement plans for the workers. During the past decade, AA slipped from first place to third, still respectable and formidable in size but never profitable. Last year, American Airlines lost $471 million. In 2009, it lost $1.5 billion. While every other major airline was profitable, AA wasnt. Its losses for this fiscal year are expected to now top another one billion dollars. During the past five years, the company steadily streamlined operations, closed down money losing flight routes, won repeated concessions even from the unions, but all were to no avail. AA was still not turning a profit, while the rivals were. Seeking a solution to its continued financial woes, it even approached other airlines seeking a cooperative merger, only to be rebuffed by bean counters who shrewdly noted that American Airlines daily operational costs were higher than everyone elses. While a merger was in American Airlines best interests, it was not in the carriers they approached seeking to partner with. While AAs CEO Gerard Arpey boasted in October that, American Airlines is well positioned to capitalise on the opportunities unfolding in the marketplace, the truth was just the opposite. Desperate to stop the bleeding, it offered to put up as collateral 43 of its fleet aircraft in exchange for $730 million in additional financing. Daily Post found that AA secretly put into operation its plan to declare bankruptcy as early as this past August, officially taking it to Board of Directors in November. CEO Arpey resisted this move, and wrote in an email to be sent to employees announcing his departure, I concluded that my remaining in those roles would not be best for the company. The different perspective Arpey alluded to was the fact that he wholeheartedly disagreed with the move to declare bankruptcy and destroying the value of investors stock in ARM which has now become basically worthless. 1.0v1 Dec 1, 2011 Kal K. Korff is an officially accredited internationally known author, columnist and investigative journalist.

Copyright 2011 by Kal K. Korff - ALL RIGHTS RESERVED. No part of this content may be reproduced in any form nor by any means without the express, written consent of Kal Korff. Fair use, does NOT apply. By reading this document, you willingly agree to be legally bound by its terms and conditions. Violators of this policy will have a felony DMCA Copyright infringement notice filed against them with law enforcement. First time offenders may be fined up to $500,000, imprisoned for five years, or both. For repeat offenders, the maximum penalty increases to a fine of $1,000,000, imprisonment for up to ten years, or both. This is a DMCA protected document, illegal copying and/or reproduction of its contents are tracked on the Internet and reported to law enforcement for felony prosecution.

Copyright 2011 by Kal K. Korff - ALL RIGHTS RESERVED. No part of this content may be reproduced in any form nor by any means without the express, written consent of Kal Korff. Fair use, does NOT apply. By reading this document, you willingly agree to be legally bound by its terms and conditions. Violators of this policy will have a felony DMCA Copyright infringement notice filed against them with law enforcement. First time offenders may be fined up to $500,000, imprisoned for five years, or both. For repeat offenders, the maximum penalty increases to a fine of $1,000,000, imprisonment for up to ten years, or both. This is a DMCA protected document, illegal copying and/or reproduction of its contents are tracked on the Internet and reported to law enforcement for felony prosecution.