American Airlines files for bankruptcy protection

DALLAS – The parent company of American Airlines filed for bankruptcy protection Tuesday, seeking relief from crushing debt caused by high fuel prices and expensive labor contracts that its competitors shed years ago. The company also replaced its CEO, and the incoming leader said American would probably cut its flight schedule “modestly” while it reorganizes. The new CEO, Thomas W. Horton, did not give specifics.

For most travelers, though, flights will operate normally and the airline will honor tickets and take reservations. American said its frequent-flier program would be unaffected.

AMR Corp., which owns American, was one of the last major U.S. airline companies that had avoided bankruptcy. Rivals United and Delta used bankruptcy to shed costly labor contracts, reduce debt, and start making money again. They also grew through mergers.

American – the nation’s third-largest airline with an 80-year history that reaches back to the dawn of passenger travel – was stuck with higher costs that meant it lost money when matching competitors’ lower fares.

In announcing the bankruptcy filing, AMR said Gerard Arpey, 53, a veteran of the company for almost three decades and CEO since 2003, had retired and was replaced by Horton, 50, the company president.

Horton said the board of directors unanimously decided Monday night to file for bankruptcy. In a filing with federal bankruptcy court in New York, AMR said it had $29.6 billion in debt and $24.7 billion in assets.

During a hearing in a packed bankruptcy courtroom Tuesday, in New York, a judge granted the airline permission to pay for fuel, labor and other critical expenses to keep it flying. The hearing was an indication of how American will now need to run all of its financial decisions past a bankruptcy judge and, ultimately, creditors.