American Airlines, Inc. announced that its parent company, AMR Corporation, and certain United States-based subsidiaries today voluntarily filed for Chapter 11 reorganization under United States law. American took this action in order to achieve a cost and debt structure that is competitive in the airline industry so that it can continue delivering a world-class travel experience for its customers.

American expects to continue normal business operations throughout the reorganization process, and the business will continue to be operated by the Company’s management. The United States Chapter 11 reorganization process enables a company to maintain normal business operations while it establishes a competitive cost and debt structure. This action has no direct legal impact on any American Airlines operations outside the United States.

American Airlines is operating normal flight schedules, honoring tickets and reservations as usual, and making normal refunds and exchanges. American’s AAdvantage frequent flyer program is not affected. American remains part of the oneworld alliance, of which it is a founding member, and all of its codeshare partnerships continue, enabling customers to earn and redeem miles on convenient flight options worldwide.

“American’s customers are always our top priority and they can continue to depend on us for the safe, reliable travel and high quality service they know and expect from us,” said Thomas W. Horton, Chairman, Chief Executive Officer and President of AMR and American Airlines.

“American serves 260 airports in more than 50 countries and territories, and we are committed to maintaining a strong presence in worldwide markets. I am confident American will emerge even stronger as a global leader known for excellence and innovation, a travel partner customers seek out, and a carrier that serves communities throughout the world.”

Passenger risks

Many passengers are left with questions as to what protections they have in the event American Airlines fails. FlyersRights.org have produced the following advice:

• There is risk that your ticket will not be honored by AA should their restructuring fail.
• If you have frequent flyer miles, book your trip now, preferably on a code-share partner of AA that is not at risk of bankruptcy.
• Ticket holders are unsecured creditors, last on the list of creditors, so if AA shuts their doors there will be little to NO relief for affected ticket holders.
• Reciprocity rules, under which airlines were required to honor other airlines’ tickets in cases such as this, expired in 2007. Ticket holders will be left holding the bag if AA does fall.
• Some airlines may have insurance to guard against passenger loss in this situation, but we don’t know if American Airlines has insurance that would cover the kind of volume that AA would have to cover if they fail entirely.
• American Airlines’ refusal to take bailouts was admirable. They wanted complete management control with no government intervention, but it appears that need for control was fatal.
• It appears that they filed bankruptcy because of high labor costs and extremely large management bonuses.   FlyersRights hopes that other air carriers will take note.

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