On Monday, shares for American Airlines' parent company, AMR Corp.'s, stock fell 33%, renewing bankruptcy concerns in the midst of contract negotiations with pilots.
Eight years ago, AMR Corp. barely escaped from bankruptcy proceedings with a last-minute concession by labor unions. Although the corporation was able to avoid Chapter 11, it meant that the company couldn't reduce costs like other airline industries that filed were able to do.
Filing for bankruptcy allows airline companies to rewrite contracts, get rid of unneeded aircraft, and engage in other cost cutting measures. If American Airlines was to file for bankruptcy, customers would likely see these types of negotiations rather than losing an entire corporation, so customers shouldn't worry about another Pan Am.
As other companies cut costs through bankruptcy to regain profits, American Airlines lost $12 billion over the last decade.
AMR has blamed its losses on labor costs, which it claims are $800 million higher per year than comparable airlines. As a result, American Airlines has continually tried to renegotiate labor contracts with little success. Unions for the pilots, flight attendants, and ground crew feel as though they gave up more than enough in the 2003 concessions.
Retirement among American Airlines pilots in September and October is projecte to be 10 times the normal rate. Most are hoping to shelter pensions from what appears to be a declining stock market.
More and more of our pilots are worried about the viability of our company and the bankruptcy potential to affect pensions, Sam Mayer, an Allied Pilots Association spokesman, told Bloomberg.
With continual losses and news of pilot retirements, AMR stocks have been trading at an unprecedented rate. On Monday, more than 76.8 million AMR stocks changed hands. The stock ended the day at $1.98, down 98 cents from the previous day. This is the first time that shares have gone under $2 since the 2003 bankruptcy scare. On Tuesday morning, the stock was working its way back up to $2.29 at 10:15 a.m.
It appears American Airlines will not be filing for bankruptcy, yet.
Regarding rumors and speculation about a court-supervised restructuring, that is certainly not our goal or our preference. We know we need to improve our results, and we are keenly focused as we work to achieve that, AMR said in an e-mailed statement.