American Airlines makes profit during Chapter 11 bankruptcy

In October, American Airlines announced that it had made a profit during quarter three — its first quarterly profit since 2010. In fact, it set an all-time company revenue record. The company filed for Chapter 11 bankruptcy in November of 2011. American is yet another example of how Chapter 11 bankruptcy does not need to ruin a company but can, in fact, put it back in the black.

American Airlines, the third largest carrier in the U.S., is still in Chapter 11 bankruptcy proceedings. While it must still make a labor deal with the Allied Pilots Association (APA), American has been able to reduce labor costs substantially through contractual changes with other unions. Furthermore, it has received a bankruptcy judge’s permission to throw out its contract with the pilots union, a decision that has bolstered the airline’s position in talks between the two parties.

American Airlines still has high labor costs compared with other airlines in the country. American pays 28 percent of its revenue in labor costs, compared with 18 percent at Delta.

There is talk that American will merge with US Airways, which would allow US Airways to better compete with other large airlines in the U.S., including Delta and United. The CEO of American, however, would prefer to keep American a sole entity and believes it will emerge successfully from Chapter 11 with the help of investors.

Is your business in debt? Consider Chapter 11.

Whether your business is a large national business or a small Californian business struggling to make ends meet, Chapter 11 bankruptcy may help you reorganize your debts and rework your labor and other costs while remaining in control of the business. To learn more, please visit our pages on Chapter 11 bankruptcy.

Source: Forbes, “Once it emerges from bankruptcy, let American Airlines stay American,” James K. Glassman, Oct. 16, 2012

Recent Posts