FORT WORTH, Texas (MCT) — American Airlines’ parent company, AMR Corp., filed for Chapter 11 bankruptcy Tuesday, and Chief Executive Gerard Arpey has retired.
The Fort Worth-based carrier said it will continue to operate a normal flight schedule for American Airlines and its regional subsidiary, American Eagle, while it is reorganizing in bankruptcy.
The airline named its current president, Tom Horton, as the company’s new chief executive.
“This was a difficult decision, but it is the necessary and right path for us to take — and take now — to become a more efficient, financially stronger, and competitive airline,” Horton said.
He pointed to the cost disadvantage American has compared to other legacy carriers, such as United Continental and Delta Air Lines, both of which went through Chapter 11 reorganization in the last decade.
AMR said it has $4.1 billion in cash, which means it does not need to obtain debtor-in-possession financing to maintain operations while under bankruptcy protection.
The company has had only two profitable years in the past decade. Its stock had slipped to an eight-year low, closing at $1.62 on Monday.
AMR was also facing some large debt payments. The company had $1.8 billion due by the end of 2012. The net debt at the end of the third quarter was $16.9 billion. And when $7.9 billion in underfunded pension benefits and $2.5 billion in other long term liabilities are added, the company has close to $30 billion in debt and other long-term obligations.
In a letter sent to AMR employees Tuesday morning, Arpey said the company’s board had asked him to stay on as chief executive but that he chose to retire.
“After careful consideration, I concluded that my remaining in those roles would not be best for the company,” Arpey said in the letter. “In my view, executing the board’s plan will require not only a reevaluation of every aspect of our business, but also the leadership of a new chairman and CEO who will bring restructuring experience and a different perspective to the process.”
