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American Airlines Files For Bankruptcy Protection
Originally published on Tue November 29, 2011 10:16 am
STEVE INSKEEP, HOST:
NPR's business news starts with American Airlines filing for bankruptcy.
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INSKEEP: Let's find out why the parent company of the giant airline sought Chapter 11 bankruptcy protection today. One of the corporate press releases does not offer too much help - not even using the word bankruptcy. Instead, headlined: American Airlines Begins Legal Process in United States to Improve Competitiveness.
NPR's Chris Arnold is covering this story. Chris, what does that actually mean?
CHRIS ARNOLD, BYLINE: Well, you don't have to read between the lines too much to figure out that they're declaring bankruptcy. And basically, the problem at American is similar to the problems at a lot of other airlines, and this is not something new. In fact, American is the only so-called legacy airline that hadn't declared bankruptcy. And the problems here are just, look, you know, their competitors have come in - like Southwest and Jet Blue - and originally, they were smaller. Southwest is now getting bigger.
But they're more nimble. They don't have to operate these big hubs. And that's brought price pressures on the larger airlines. And some of those larger airlines have merged now. So United and Continental have come together, and that's put pressure on American. And finally, just the economic turmoil that adds to all of the airlines' problems. So all those things, taken together, are hurting American Airlines.
INSKEEP: But Chris, I notice that American was in the middle of some tough negotiations with its unions. Does a bankruptcy filing give them a tactical advantage in negotiations like that?
ARNOLD: Sure. I mean, you know, you look at the auto industry or anything else, and it is a chance to open up the hood and say OK, wait a minute, we've got these pensions - or whatever else - and take a look at all of that, so that will probably be part of this.
INSKEEP: So whatever the reason, employees as well as creditors could be affected by this move, Chris Arnold. What about passengers?
ARNOLD: Well, apparently, you might think flying on a bankrupt airline doesn't sound like a good idea. But when this has happened before with all the other major airlines, it hasn't made much of a difference for travelers. And I've actually had a couple emails this morning of people saying, oh, what's going to happen to my frequent flier miles? And American Airlines says the frequent flier program's the same; all the partner airlines are the same. As far as regular travel, the routes will be the same. So this should just be business as usual for American Airlines passengers.
INSKEEP: NPR's Chris Arnold, thanks very much.
ARNOLD: You're welcome. Transcript provided by NPR, Copyright NPR.