Major airline reported to be close to bankruptcy

Speculation continues over future of American Airlines

Questions continue to be raised about whether American Airlines is heading for bankruptcy. Its deteriorating financial situation has resulted in the company’s stock trading at the lowest prices since 2003, tumbling a further 33% yesterday. American decided not to use bankruptcy protection in 2005, as several of its competitors did, and consequently it has far higher labour costs. Labour accounts for 31% of its total costs, according to Forbes, compared to 22% to 23% at Delta and United Continental. Negotiating new terms with the carrier’s unions have been unsuccessful. The situation may result in American being forced to reorganise under Chapter 11 bankruptcy protection. Or, if the airline’s problems prove too much, it will be forced into Chapter 7 – total liquidation.
Smarter Travel
[pictured: American Airlines B757 in retro livery; courtesy oneworld]