Flying bankrupt

[Gob]

American Airlines' parent company AMR Corporation has filed for Chapter 11 bankruptcy protection.

Shares in the airline plunged immediately they resumed trading on Tuesday and closed 81% down. They are now worth 31 cents each.

The company expects the airline to continue to operate as normal throughout the bankruptcy process.

Speculation about AMR's financial position surfaced in recent weeks after cost-cutting negotiations failed.

AMR said agreements with its workforce forced it to spend $600m (£384m) more than other airlines on staff costs.

The airline employs 78,000 staff worldwide and operates out of five major US hubs.

Chapter 11 refers to a section of the US Bankruptcy Code. It protects a company from its creditors, giving it time to reorganise its debts or sell parts of the business.

American Airlines was the only one of the major US airlines operating international routes not to file for bankruptcy after the September 11th terrorist attacks.

Its competitors have successfully used bankruptcy to restructure their labour contracts and cut costs.


http://www.bbc.co.uk/news/business-15935206

[quaddriver]

yep. Ch11 is a tool to break some expensive labor contracts.

contracts, you know, the tool only the little guy has to abide by.

[dgs49]

It's not just labor contracts. Its sales contracts, service contracts, purchase agreements, leases, mortgage loans, the works.

I had no idea the airline was that big. 78,000 people is a shitload.

Trouble with many union deals is that work like a ratchet, turning only in one direction. When time comes that things should roll back, the unions are unwilling.

I guess we'll see how that works out for 'em.

I wonder if they are "too big to fail," and the American taxpayers will end up taking a bath.

[quaddriver]

we already did around 9/12/2001

[Scooter]

Trouble with many union deals is that work like a ratchet, turning only in one direction. When time comes that things should roll back, the unions are unwilling.

Blatantly untrue, especially in the airline industry, where unions have eaten concessions numerous times to stave off their employers' bankruptcy. Let's remember what happened the last time American Airlines threatened bankruptcy, shall we?

The union givebacks that the company claims are required to stay out of Chapter 11 were nearly derailed when workers responded with outrage to revelations that top management had awarded themselves fat bonus and pension plans while demanding wage and benefit cuts from rank-and-file employees.

Workers’ anger forced the unions to temporarily suspend approval of massive concessions that the membership had just ratified—including six-year pay cuts of between 16 and 23 percent, along with 6,900 layoffs—while the company’s board of directors continued to threaten an immediate bankruptcy filing.

The day after the airline’s pilots, flight attendants and ground workers first voted to accept the concessions packages, news reports revealed the company had secretly agreed to pay seven top executives bonuses worth millions of dollars if they stayed with the company until February 2005.

In addition, unbeknownst to workers when they were voting to give up tens of thousands of dollars apiece to “save” the airline, company directors last year had authorized setting aside $41 million for a special executive pension plan in a trust that would be protected from creditors in the event of bankruptcy.

The unions did their part, giving up tens of thousands in compensation per worker, only to see management reward themselves with fat bonuses and gold plated pensions for driving the company into the ground.

[BoSoxGal]

Scooter, you do have a penchant for casting pearls before swine, don't you?

[loCAtek]

... and going into overload.

[Scooter]

Now that I've proven that I've been cured of HIV, why not?