AMR, the parent company of American Airlines, has filed for bankruptcy. Unlike its rivals Continental, Delta and US Airways, America's third-largest airline had previously avoided chapter 11 (whereby a company gains protection from its creditors while it restructures). American has lost over $10bn in the past decade, and has net debts and retirement obligations of $15bn.
What the commentators said
While its rivals have made money in recent years, American hasn't and the darkening macroeconomic backdrop won't help, said Economist.com. It has also been holding talks with staff to lower costs, but hasn't got very far. "Presumably the bankruptcy filing will help to concentrate minds at the negotiating table."
Bankruptcy courts "have wide latitude" to rewrite employment contracts, said Jeremy Lemer in the FT. When other airlines were in chapter 11, they managed to trim labour costs by up to 30%. Indeed, that's the main reason there was "an air of inevitability" about this filing.
Subscribe to MoneyWeek
Subscribe to MoneyWeek today and get your first six magazine issues absolutely FREE
Sign up to Money Morning
Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter
Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter
American has been struggling with labour costs that are far higher than its rivals', as well as an ageing, gas-guzzling fleet (which it is now replacing). American has $4.1bn of cash, which is still enough to keep operating through a restructuring. So it made sense to file before burning through much more, said Liam Denning in The Wall Street Journal. When it exits chapter 11, it "should be a smaller, leaner airline still possessing a well-known brand".
-
What happens if you can’t pay your tax bill, and what is "Time to Pay"?Millions are due to file their tax return this Friday as the self-assessment deadline closes. Though the nightmare is not over until you pay the taxman what you owe - or face a penalty. But what happens if you can't afford to pay HMRC your tax bill, and what is "Time to Pay"?
-
What does Rachel Reeves’s plan for growth mean for UK investors?Rachel Reeves says she is going “further and faster” to kickstart the UK economy, but investors are unlikely to be persuaded
