[AirlineComplaints.org]

NEW YORK (CNNMoney) -- American Airlines' parent company, AMR Corp., announced Tuesday that it has filed for chapter 11 bankruptcy.
The decision comes as the airline tries to "achieve a cost and debt structure that is industry competitive and thereby assure its long-term viability and ability to continue delivering a world-class travel experience for its customers," the company said in a statement Tuesday.

AMR (AMR, Fortune 500) said American Airlines, American Eagle and all other subsidiaries will honor all tickets and reservations and operate normal flight schedules during the bankruptcy filing process, using its $4.1 billion in cash

Source.

[AADFW]

Hopefully they will emerge leaner and stronger. At the very least, I'm wishful that the remaining unhappy "sky cows" on the international flights will disappear along with their pensions and bloated salaries. If AA survives restructuring and gets through it quickly (which I'm betting they will), I think we will see a younger, more dynamic airline much better prepared for future competition and perhaps somewhat more responsive to a greater number of it's customers needs.

[jimworcs]

History is not on our side with this...

United have done a sterling job destroying any ethos of customer service at Continental...and Delta destroyed Northwest. US Airways ruined my favourite US airline (Piedmont). AA destroyed TWA and look like they are going to eat up US Airways in their race to the bottom.

The extraordinary thing about chapter 11 in the US, is that it interferes with normal market forces. Customers decide that an airline is no longer meeting their needs and bankruptcy follows. The market would then allow new entrants to come in and service standards and pricing would improve as they compete to take market share. Airlines seeking market share try harder (JetBlue, VirginAmerica, Alaska)... airlines "too big to fail" abuse their monopolies (Delta, United, US Airways, etc). Instead of allowing this to happen, Chapter 11 protects managers, and allows them to breach contracts, rip up employee contracts, even emerge larger by taking over other airlines. This means that AA has nothing to lose from bankruptcy... but you can bet the senior managers will have huge payouts as they emerge and parachute payments if they leave. Regular crew however, will emerge embittered and angry and this will be reflected in the service provided. Delta are the perfect illustration of this.

What to do:

1. Allow airlines to fail.
2. To protect routes, the bankruptcy administrator can auction off routes, aircraft and slots
3. No bidding airline can exceed 25% of the slots in any given airport.
4. Agree bi-lateral agreements to allow foreign airlines to compete. This would allow well funded airlines to come in an compete with the big boys...such as Singaport Airlines or Lufthansa. This can be done on a bi-lateral basis, opening up international markets for US based airlines to compete.
5. Re-regulate the airlines, setting minimum protections for customers, including fairer and more transparent terms and conditions, with compensation. The model of Regulation 261 in Europe would be a good start.

AA filed for bankruptcy with cash reserves of over $4bn. This is a device to screw their suppliers and rip up employee contracts. It has nothing to do with improving services for the passenger.

[AADFW]

Originally Posted by jimworcs

Customers decide that an airline is no longer meeting their needs and bankruptcy follows.

You've made some interesting and valid points here, most of which I agree with and ardently support. However, American's bankruptcy had nothing to do with load factors or inability to generate comparable top line on a per seat mile basis. It was about having the highest labor costs in the industry because AA was the only major legacy carrier that had not been afforded the opportunity to reduce those unionized costs under Chapter 11 protections. In essence, Chapter 11 had become requisite for this very reason. Arpey tried for years to avoid the "moral hazard" of bankruptcy but in the end economic reality won out. AA unions simply refused to give up as much ground as was necessary to get the job done. Now they will be forced to do so because that's what's already happened throughout the rest of the US airline industry.

Originally Posted by jimworcs

It has nothing to do with improving services for the passenger.

Agreed, but service improvements may result if only as a consequence of attrition; there are still many unhappy legacy AA flight attendants enjoying fat salaries and pensions who will leave as a result of their revised compensation. These are the often worst offenders -- those who couldn't care less about service or the customer experience and have been protected by their overly powerful union for years. There's an excellent chance that their younger replacements could be just as bad, but it's hard to imagine them being much worse.

Originally Posted by jimworcs

you can bet the senior managers will have huge payouts as they emerge and parachute payments if they leave.

Perhaps not; upon retirement Gerard Arpey ended up with a bunch of worthless stock and no severance as per his contract. AMR board members are reasonably sensitive and ethical on this point, as the Don Carty fiasco illustrated.

Originally Posted by jimworcs

Agree bi-lateral agreements to allow foreign airlines to compete. This would allow well funded airlines to come in an compete with the big boys...such as Singaport Airlines or Lufthansa. This can be done on a bi-lateral basis, opening up international markets for US based airlines to compete.

This is a great idea in theory and one I strongly support, but the reality is that Congress considers foreign ownership of domestic carriers a matter of national security. Given the political climate surrounding such issues in Washington these days the prospect of this happening in our lifetimes is extremely unrealistic.

[jimworcs]

Well, American is faced with the distortions created by the bizarre incentives created by Chapter 11. US Airways, Delta, Continental, Northwest and United had all filed Chapter 11 before them and were then allowed to dump their contractual obligations to suppliers, lease and bond holders and employees. As a result they emerge "more competitive". Chapter 11 is a "get out of jail free" card to bad management.

To blame the unions or staff for this state of affairs is a bit disingenuous. I could make any company "efficient" if the government offered me the chance to strip employees of their pensions, reduce their benefits and cut pay and avoid paying costly bond payments on out of date aircraft which are highly inefficient in fuel burn.

As for allowing foreign ownership of US based airlines, the "national security" excuse is nothing more than protectionism wrapped up in a flag. BAe, a British owned company, is the third largest defense contractor in the USA. Are they seriously suggesting that this is less of a national security issue than if British Airways owned American Airlines.

The current state of affairs just isn't working. No one thinks US airlines have improved in the last 30 years...even the people who work on them. They are patchy at best at making a profit. Standards of service have deteriorated massively. It is time for a change... more regulation, increased competition and greater consumer power.

The only people who benefit from the current system are fat cat managers, stripping huge sums in bonuses, pensions and pay-offs... the rest of us suffer.