Is American Airlines Flying High With A Chapter 11 Bankruptcy? Skip to main content

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Is American Airlines Flying High With A Chapter 11 Bankruptcy?


In a classic case of what goes up, must come down, the world’s forth largest airline is now seeking the safe havens of bankruptcy so that it might once again be “something special in the air.”

According to Reuters, American filed for Chapter 11 bankruptcy protection this week “to cut labor costs in the face of high fuel prices and dampened travel demand, capping a prolonged descent for what was once the largest U.S. carrier.”

Apparently, the U.S. company “which employs about 88,000, has been mired for years in fruitless union negotiations, complaining that it shoulders higher labor costs than rival domestic and foreign carriers that have already restructured in bankruptcy. United Continental Holdings Inc's United Airlines and Delta Air Lines Inc, both of which used Chapter 11 to cut costs and later found merger partners, are now the largest U.S. carriers. American ranks third. ‘The world changed around us,’ incoming Chief Executive Tom Horton told reporters on a conference call. ‘It became increasingly clear that the cost gap between us and our competitors was untenable.’”

AMR Corp, the parent of American Airlines, also filed for bankruptcy and replaced its chief executive. “Bankruptcy gives AMR a chance to pare less profitable operations, and could result in the sale of flight routes. The process also gives AMR more flexibility, according to Jack Williams, a professor of law at Georgia State University. ‘There are considerable tax benefits that they will be able to use in a bankruptcy case, and they will be able to more aggressively manage their liabilities,’ Williams said.”

And so, the American Airline bankruptcy provides a lesson for even the smallest business owner. Specifically, Chapter 11 of the Bankruptcy Code provides for reorganization, in most cases of a corporation or partnership. In the process, a chapter 11 debtor usually proposes a plan of reorganization to keep its business alive and pay creditors over time. People in business or individuals can also seek relief in chapter 11 when their debts are out of control.

So, whether you fly high with your own airline or are simply working to place your business back on solid ground, if your specific industry has been affected by the economic downturn, Chapter 11 can buy you the time you need to reorganize the way you do that business as well as get you back to making better financial decisions. And buying you time to tweak your business model (or, in some cases, your personal budget) is part of what Chapter 11 is all about: diminishing debt while you save your means to profit. Even if your business model is too small for Chapter 11 relief, you may still need the benefits that a Chapter 13 bankruptcy can provide from personally guaranteed debts.

So, are you an active businessperson who is considering a new chapter for your business or organization through the benefits of a bankruptcy filing? Or are you an average American reading about the benefits of bankruptcy and want to learn more about how these types of benefits can actually benefit you?

Well, first and foremost, when you are seeking the broad protections of bankruptcy, it’s best to consult with a qualified attorney before filing. A qualified bankruptcy attorney is important during the bankruptcy process to help you navigate any uncertain waters and work in your best interests throughout the duration of the case, regardless of your status. If you live or work in North Carolina, the bankruptcy attorneys at the Law Offices of John T. Orcutt offer a totally FREE debt consultation and now, more than ever, it’s time to take them up on their offer. Just call toll free to +1-919-646-2654, or during the off hours, you can make your own appointment right online at Simply click on the yellow “FREE Consultation Now” button.

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