The parent of American Airlines filed for bankruptcy protection Tuesday and pledged to emerge as a stronger carrier in a move that could prompt another bout of industry consolidation and present a stern test for regulators.
AMR Corp. filed for protection in New York in a surprise move given it has more than $4 billion in cash, but appointed Thomas Horton as chairman and chief executive afterGerard Arpey opted to retire and join an investment group.
Its shares were halted premarket and closed Monday at $1.62. The stock is down 54% over the past three months.
AMR has suffered losses of more than $10 billion since 2001 as the company has struggled to bring its cost structure in line with rivals such as United Airlines and Delta Air Lines who have restructured under court protection and found merger partners. Until Tuesday, American was the only U.S. legacy airline that hadn't filed for bankruptcy protection.
Mr. Horton told reporters on a conference call that bankruptcy was a "well-worn path" and that the airline plans to keep its huge orders for Airbus and Boeing Co. aircraft, which are due to start arriving from next year.
American and its Eagle commuter unit will continue operating as normal, and Mr. Horton said there are no plans for a big shrinkage in the airline. It plans to put the planned spinoff of it American Eagle commuter unit "on hold."
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American Airlines planes sit on the tarmac at Miami International Airport.
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"We may trim the schedule a bit, but it will be modest," he said. The move would likely lead to some job losses.
AMR's board and management has repeatedly said bankruptcy was not its favored option, even as an impasse with its pilots over securing a new contract undermined investor confidence.
The Fort Worth, Texas-based company has about $4.1 billion in unrestricted cash and short-term investments, which is expected to be sufficient to pay vendors, suppliers and other business partners during the Chapter 11 process. AMR doesn't expect to need debtor-in-possession financing.
Mr. Horton said the pilot issue wasn't "the final straw" in deciding to file for bankruptcy, citing a range of contributing factors including a credit downgrade and the uncertain economic climate.
AMR's board met Monday in New York and unanimously signed off on the plan during a conference call late in the day, Mr. Horton said.
He declined to comment on whether AMR had held talks with any potential suitors. US Airways Group Inc. is widely seen by analysts as a potential fit, though any deal would unleash huge integration issues, particularly with labor groups.
US Airways, itself the product of a merger, made an unsolicited bid for Delta after the Atlanta-based carrier filed for bankruptcy protection and later merged with Northwest Airlines.
An American-US Airways deal would leave more than 70% of the U.S. market in the hands of three companies, a move that some observers see being opposed by regulators.
Mr. Arpey, who joined American Airlines as a financial analyst rose through a number of managerial roles before being named CEO of AMR and American in 2003 and chairman about a year later.
"For 30 years Gerard Arpey has given his all to this company, especially during the last decade," said AMR lead independent director Armando M. Codina. He praised Mr. Arpey's "exceptional integrity, intelligence and commitment" and said "he helped our company to achieve amazing things against sometimes staggering odds. Although we had asked that he continue to lead American, we understand and respect his decision to retire."
Mr. Horton, who joined AMR in 1985, has held a range of senior financial positions and was promoted to president of AMR and American Airlines in July 2010. In the expanded role he oversaw finance, planning, sales and marketing, customer service, information technology and American's global alliance strategy. Mr. Horton spent a few years atAT&T Inc. in 2002 to 2006, where he served as chief financial officer.
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