AMR Bankruptcy Demonstrates Opportunity to Negotiate

September 18, 2012

Last November, AMR Corp., the parent company for Fort Worth-based American Airlines, filed for Chapter 11 bankruptcy. For industry observers, it wasn’t a big surprise. In the last five years, customer value and profits have taken a nosedive, ultimately culminating in the New York Stock Exchange pulling the stock from the market.


Fast-forward to this week and management is busy licking 11,000 stamps so that it can notify at-risk employees that they may lose their job. (However, AMR predicts that when the dust settles only about 4,400 mechanics and ground workers will be fired.) These terminations come in the wake of extensive labor negotiations between AMR management and a round robin of labor groups and unions in which pilots, flight attendants, and ground workers accepted a variety of cost-cutting policies.


So what’s really going on with AMR’s bankruptcy? Ironically, although many people think of bankruptcy as problem, bankruptcy professionals tend to think of Chapter 11 as a solution. In AMR’s case, the debtor (i.e. management) is using bankruptcy as a way of forcing its creditors (i.e. labor) to the negotiating table. AMR’s bankruptcy isn’t really about shorting bondholders, but putting pressure on labor to cut costs. The hope, of course, is that the American Airlines that emerges at the end of this long flight through Chapter 11 will be leaner, more competitive, and ready to take on other legacy carriers that have already endured bankruptcy and profitable bargain carriers like Southwest Airlines.


Whether you’re managing a struggling business or a family’s thinning pocketbook, bankruptcy might be a solution to your financial challenges, just like it has been for AMR Corp. The numbers may be smaller and the negotiations less complex, but the basic concepts remain the same. Bankruptcy can be an opportunity to force creditors to the negotiating table and find out if there’s an acceptable plan going forward.


The bankruptcy professionals at the Dallas law firm of Fears Nachawati are prepared to help you consider your financial options. Our creative professionals may be able to help you find solutions that you – and your creditors – may have never considered. To get started with your free consultation, contact us today. We can help you.

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