Kal Korff

American Airlines Struggling Hard to Avoid Bankruptcy

by Kal K. Korff
Internationally Syndicated Copyright 2011 by Kal K. Korff - ALL RIGHTS RESERVED.

AMR Corporation, the parent company of American Airlines, which is the worlds third largest commercial air carrier, is in serious financial troubles. In yesterdays trading, while the Dow Jones was down some 200 points overall, the companys stock plunged 40 per cent in value closing at an all-time low of $1.98 per share. American Airlines now has the dubious distinction of being the only major air carrier to lose money for the past two years. It has already told analysts that it does not expect a return to profitability even in 2012, according to statements made by the company. The US based airlines reported record fourth quarter profits in 2010, totaling nearly $4 billion, according to AirlineFinancials.com, which tracks the industry. The Air Transportation Association of America also reported similar data, noting that revenues from passenger flights increased some 9 per cent, capping a full year of steady growth over a twelve month period. The sole exception to this trend has been American Airlines. Last year, AA lost $471 million. Despite the nearly half a billion dollar loss, investors were relieved it was only half a billion, compared to the companys losses in 2009, which totalled a staggering $1.5 billion. American is well positioned to capitalize on the opportunities unfolding in the marketplace, declared Gerard Arpey, AMRs Chief Executive Officer. While the road forward is not without challenges, as we begin 2011, we are enthusiastic about the possibilities we see ahead, Arpey said in a widely publicised statement for investors. Arpeys boasts have not panned out. Facing a cash shortage combined with the lowest price point for its stock in seven years, American Airlines has now announced that they

will be executing a series of last gasp measures to fend off declaring bankruptcy. Their ambitious plan now envisions raising some $730 million by issuing debt note certificates, using 43 of their fleet carrier aircraft as collateral. AA officials have also stated that they might also pursue raising another $230 million for a total of nearly a billion dollars. AMR released details of their plan to raise badly needed cash in documents which were made public when filed with the Securities and Exchange Commission. AA still has $4.7 billion is cash reserves, in the airline industry even this tidy sum can be consumed quickly. Despite the companys plans to increase cash flow by nearly a billion dollars, many financial firms remain unimpressed Moodys has downgraded AMRs outlook to negative and has issued a Baa3 rating over the plans to issue debt certificates using its planes as collateral. Moodys downgraded the company, but JP Morgan holds a different view. With the disruptive winter season coming, the financial investor house noted that the bottom line is that this deal makes us feel better about the AMR near-term credit story. Last winter in 2010, severe snow storms caused thousands of flights to be cancelled, costing the airlines millions of dollars in lost revenues. While the industry recovered as a whole and earned impressive profits, American Airlines was the largest loser of the top ten carriers. Most network airlines have gone to bankruptcy court in the last decade, sometimes repeatedly, to restructure their obligations and rewrite contracts as fuel prices soared and the industry struggled against low-cost competitors. American, however, managed to avoid filing for bankruptcy after obtaining major concessions from its labor groups. The strategy still left the airline with higher operating costs than the other legacy carriers, including pension obligations, higher labor costs and less flexible work rules for its pilots. American has struggled in recent years to make up that gap, posting losses. 1.0v1 Oct 5, 2011 Kal K. Korff is an an officially accredited internationally known author, columnist and investigative journalist.

Copyright 2011 by Kal K. Korff - ALL RIGHTS RESERVED. No part of this content may be reproduced in any form nor by any means without the express, written consent of Kal Korff. Fair use, does NOT apply. By reading this document, you willingly agree to be legally bound by its terms and conditions. Violators of this policy will have a felony DMCA Copyright infringement notice filed against them with law enforcement. First time offenders may be fined up to $500,000, imprisoned for five years, or both. For repeat offenders, the maximum penalty increases to a fine of $1,000,000, imprisonment for up to ten years, or both. This is a DMCA protected document, illegal copying and/or reproduction of its contents are tracked on the Internet and reported to law enforcement for felony prosecution.

Copyright 2011 by Kal K. Korff - ALL RIGHTS RESERVED. No part of this content may be reproduced in any form nor by any means without the express, written consent of Kal Korff. Fair use, does NOT apply. By reading this document, you willingly agree to be legally bound by its terms and conditions. Violators of this policy will have a felony DMCA Copyright infringement notice filed against them with law enforcement. First time offenders may be fined up to $500,000, imprisoned for five years, or both. For repeat offenders, the maximum penalty increases to a fine of $1,000,000, imprisonment for up to ten years, or both. This is a DMCA protected document, illegal copying and/or reproduction of its contents are tracked on the Internet and reported to law enforcement for felony prosecution.