November 29, 2011
AMR Files for Bankruptcy
AMR, the parent corporation of American Airlines and American Eagle Airlines, announced this morning that it has filed for Chapter 11 bankruptcy protection. See Michael J. De La Merced, American Airlines Parent Files for Bankruptcy, New York Times Dealbook, Nov. 29, 2011 (available here). American is the last of the legacy carriers to file for bankruptcy protection and the only major U.S. airline not to have done so following the 2001 terrorist attacks. The possibility of a bankruptcy filing had been the subject of increasing speculation by analysts in recent months. American will continue operating while under bankruptcy protection as many of the other carriers have done. The nation's third-largest carrier by number of destinations (fourth-largest by number of passengers) is expected to use bankruptcy to shed labor costs and unwanted aircraft leases, but reportedly intends to continue with its recent purchase of new aircraft from Boeing and Airbus in the hopes of reducing costs by transitioning to a newer, more fuel-efficient fleet. This announcement provides an opportunity to revisit past discussions of deregulation and its effects on the domestic airline industry in upcoming blog posts. For now, those interested in the immediate consequences of the bankruptcy filing may enjoy two recent papers by Federico Ciliberto and Carola Schenone about the effects of past airline bankruptcies. The authors conclude that carriers tend to lower prices and experience fewer cancellations and delays while operating in bankruptcy, but once out of Chapter 11 these measures return to, and in the case of prices exceed, pre-bankruptcy levels. By contrast, reductions in route structure, flight frequency and capacity are also common in bankruptcy but are typically permanent. See Federico Ciliberto and Carola Schenone, Are the Bankrupt Skies the Friendliest?, August 2010 (available from SSRN here); Federico Ciliberto and Carola Schenone, Bankruptcy and Product-Market Competition: Evidence from the Airline Industry, August 2010 (available from SSRN here).
November 29, 2011 | Permalink
TrackBack URL for this entry:
Listed below are links to weblogs that reference AMR Files for Bankruptcy: