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What's Next in American Airlines Bankruptcy?

Much is still in the air

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    NEWSLETTERS

    The day after American Airlines declared bankruptcy, what's next for the legacy airline.

    Creditors got a sample Wednesday of what's to come in the bankruptcy reorganization case American Airlines opened Tuesday.

    In Wednesday's motion, the company is seeking to eliminate future lease payments on 24 jets currently parked in storage at Roswell, N.M.

    The old jets are part of a fuel-guzzling fleet the company intends to upgrade even in bankruptcy.

    "Essentially, bankruptcy gives them an opportunity to take a look at their fleet, which is supposed to be one of the oldest amongst the major carriers, and get rid of the ones that are essentially gas guzzlers," bankruptcy attorney Mark Ralston said.

    What's Next for American Airlines

    [DFW] What's Next for American Airlines
    The day after American Airlines declared bankruptcy, what's next for the legacy airline.

    Ralston found 24 first-day motions among the initial Tuesday bankruptcy filings by American Airlines.

    "This was obviously something they thought about long and hard, and they were prepared to file it, a lot sooner than a lot of people expected," he said.

    Most of the initial motions support the company's promises that they plan to maintain business as usual through reorganization by seeking to secure Advantage frequent flier miles and keeping paid workers on the job.

    "They understand their success rests in their ability to demonstrate they will continue operating as they've been operating and to even improve that," Ralston said.

    But future filings may reduce pay and benefits or even reduce the number of American Airlines workers as the company seeks to cut expenses, which the company's filings claim are above competitors.

    "They will be able to force new labor contracts," Ralston said.

    Employee union leaders are waiting for details of what those reductions may be.

    "There's nothing positive to the pilot group in bankruptcy," said Tom Hoban, Allied Pilots Association spokesman.

    Hoban said past airline bankruptcy cases suggest employees may be asked for contract changes helpful to the company in pensions, salaries, work hours, health care and furloughs.

    Ralston said bankruptcy rules offer some protection for employees, but reorganization strongly favors the company, Pilots probably saw the best deal they will ever see in a pre-bankruptcy contract offer that the union recently rejected, he said.

    Ralston and Hoban agree that rejection was probably not the sole reason American chose bankruptcy reorganization.

    "American has other problems apart from its labor costs," he said.

    Hoban said the aging fleet is one of those problems.

    "The reality is this corporation is probably five years behind on their refleeting program," he said. "Our competition is out there flying fuel-efficient aircraft."

    The bankruptcy reorganization case is expected to wind through court for more than a year.

    "It's full of complexity," Ralston said. "That said, the airlines that have gone through this before have come out stronger and come out profitable."

    New filings in the American Airlines bankruptcy case are posted online.

    American Airlines bankruptcy:
    Find complete coverage of the American Airlines Bankruptcy proceedings, expert analysis, and impact to customers and the local economy in our special section. Click here for more.


    American Airlines Merger:
    Complete coverage of the merger between American Airlines and US Airways into the newly-formed Fort Worth-based company, American Airlines Group (AAL). Click here for more.