AMR and American Airlines File for Chapter 11 Reorganization to Achieve Industry Competitiveness
American Airlines, American Eagle and All Other Subsidiaries Operating Normal Flight Schedules, Honoring All Tickets and Reservations, Maintaining High Customer Service Levels and AAdvantage Program, and Continuing Employee Pay and Benefits
AMR Has $4.1 Billion in Cash to Ensure Uninterrupted Supply of Goods and Services During Proceedings
AMR Corporation (“the Company”), the parent company of American Airlines, Inc. (“American”) and AMR Eagle Holding Corporation (“American Eagle”), announced that in order to achieve a cost and debt structure that is industry competitive and thereby assure its long-term viability and ability to continue delivering a world-class travel experience for its customers, the Company and certain of its U.S.-based subsidiaries (including American and American Eagle), today filed voluntary petitions for Chapter 11 reorganization in the U.S. Bankruptcy Court for the Southern District of New York.
AMR’s Board of Directors determined that a Chapter 11 reorganization is in the best interest of the Company and its stakeholders. Just as with the Company’s major airline competitors in recent years, the Chapter 11 process enables American Airlines and American Eagle to continue conducting normal business operations while they restructure their debt, costs and other obligations.
American Airlines and American Eagle are operating normal flight schedules today, and their reservations, customer service, AAdvantage® program, Admirals Clubs and all other operations are conducting business as usual. Likewise, throughout the Chapter 11 process, American and American Eagle expect to continue to:
* Provide safe and reliable service;
* Fly normal schedules;
* Honor tickets and reservations, and make exchanges and refunds as usual;
* Fully maintain AAdvantage frequent flyer and other customer service programs, and ensure all AAdvantage miles and elites status earned by members remain secure and intact;
* Provide Admirals Club access and similar amenities to members and eligible customers;
* Remain an integral member of the oneworld® alliance, of which American is a founding member, and continue its codeshare partnerships;
* Provide employee wages, healthcare coverage, vacation, and other benefits, without interruption; and
* Pay suppliers for goods and services received during the reorganization process.
These filings have no direct legal impact on American’s operations outside the United States.
Thomas W. Horton, Chairman, Chief Executive Officer and President of AMR and American Airlines, said, “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.
“We have met our challenges head on, taking all possible action to secure our long-term position. In recent years, even as the airline industry faced unprecedented challenges, American strengthened our domestic and global network; fortified our alliances with the best partners around the world; launched a transformational fleet deal that will give American the youngest and most efficient fleet in the industry; and invested in our product, service and technology to build a world class customer experience.
“But as we have made clear with increasing urgency in recent weeks, we must address our cost structure, including labor costs, to enable us to capitalize on these foundational strengths and secure our future. Our very substantial cost disadvantage compared to our larger competitors, all of which restructured their costs and debt through Chapter 11, has become increasingly untenable given the accelerating impact of global economic uncertainty and resulting revenue instability, volatile and rising fuel prices, and intensifying competitive challenges.
“Our Board decided that it was necessary to take this step now to restore the Company’s profitability, operating flexibility, and financial strength. We are committed to working as quickly and efficiently as possible to appropriately restructure American so that it can emerge from Chapter 11 well-positioned to assure the Company’s long term viability and its ability to compete effectively in the marketplace,” Horton stated.
Horton continued, “Throughout the restructuring process, as always, our customers remain our top priority and they can continue to depend on us for the safe, reliable travel and high quality service they know and expect from us. We intend to maintain a strong presence in domestic and international markets, including our cornerstones in Dallas/Fort Worth, Chicago, New York, Miami and Los Angeles. As we and all airlines routinely do, we will continue to evaluate our operations and service, assuring that our network is as efficient and productive as possible.
“Achieving the competitive cost structure we need remains a key imperative in this process and, as one part of that, we plan to initiate further negotiations with all of our unions to reduce our labor costs to competitive levels.”
“American Airlines has a strong, proud history and we will have a successful future. Working through this difficult, but necessary action and process, I am confident we will succeed in enhancing our reputation as a global leader known for excellence and innovation, a travel partner customers seek out, and a carrier that serves communities throughout the world,” Horton concluded.
The Company has approximately $4.1 billion in unrestricted cash and short-term investments. This cash, as well as cash generated from operations, is anticipated to be more than sufficient to assure that its vendors, suppliers and other business partners will be paid timely and in full for goods and services provided during the Chapter 11 process in accordance with customary terms. Because of the Company’s current cash position, the need for debtor-in-possession financing is neither considered necessary nor anticipated.
American is filing motions today with the Court seeking interim relief that will ensure the Company’s continued ability to conduct normal operations, including the ability to:
* Provide employee wages, healthcare coverage, vacation, and other benefits without interruption;
* Honor pre-petition obligations to customers and continue customer programs including American’s AAdvantage frequent flyer program;
* Pay for fuel under existing fuel supply contracts, and honor existing fuel supply, distribution and storage agreements; and
* Assume and honor contracts relating to interline agreements with other airlines.
As announced separately today, the Board of Directors of AMR Corporation appointed Horton Chairman and Chief Executive Officer of the Company, succeeding Gerard Arpey, who informed the Board of his decision to retire. Horton will also succeed Arpey as Chairman and Chief Executive Officer of American Airlines and will retain the title of President.
AMR’s lead counsel is Weil, Gotshal & Manges LLP and its financial advisor is Rothschild, Inc.
More information about American Airlines Chapter 11 filing is available on the Internet at AA.com/restructuring. Information for suppliers and vendors is available at (866) 736-9011 or (703) 286-2757, or by sending an email to email@example.com.
AMR will be filing monthly operating reports with the Bankruptcy Court and also plans to post these monthly operating reports on the Investor Relations section of AA.com. The company will continue to file quarterly and annual reports with the Securities and Exchange Commission, which will also be available in the Investor Relations section of AA.com.
Thomas W. Horton Named Chairman and Chief Executive Officer of AMR Corporation and American Airlines; Succeeds Gerard Arpey Who Decided to Retire.
Statement Regarding Change in leadership
The Board of Directors of AMR Corporation (NYSE: AMR) (the “Company”), the parent of American Airlines, Inc. (“American”), has named Thomas W. Horton chairman and chief executive officer of the Company, succeeding Gerard Arpey, who yesterday informed the Board of his decision to retire. Horton will also succeed Arpey as chairman and chief executive officer of American. Horton will continue to serve as President of AMR and American.
“Today, we entered a new phase in the evolution of this great company with a talented and experienced new leader, Tom Horton, succeeding Gerard Arpey, who skillfully led our company through some of its most challenging times,” said Armando M. Codina, lead independent director of AMR. “With more than 22 years at American, Tom is ideally suited to guide the company through this next important period. Tom’s experience in a different company and industry gives him a unique blend of experience and objectivity that will serve the company well as we work through this process to achieve a competitive cost structure. The Board has great confidence that, together, Tom and the industry’s best workforce and management team will reaffirm American’s position of pride and leadership among global airlines.
“For 30 years Gerard Arpey has given his all to this company, especially during the last decade,” Codina continued. “Gerard is a person of exceptional integrity, intelligence and commitment, and he helped our company to achieve amazing things against sometimes staggering odds. Although we had asked that he continue to lead American, we understand and respect his decision to retire and entrust the company he loves to a new leader for a new time. This Board will always be grateful for Gerard’s unwavering commitment to what is best for the company.”
“It is a privilege and an honor to lead this company and I intend to do everything in my power to help restore its position of leadership in the global airline industry,” said Horton. “This is a difficult business in the best of times, and I cannot think of anyone I would rather have worked with or had as a friend for over two decades than Gerard Arpey. He is not only a great business leader; he is also a man of honor. With characteristic selflessness, he decided it was time for a new leader to take the company forward and I am grateful for his – and our Board’s – confidence. I know we can all count on Gerard’s friendship and encouragement as we work to reaffirm American’s place among the world’s premier airlines.”
“The process launched today will no doubt require far-ranging and sometimes difficult change, but it represents an opportunity to rebuild American in a way that assures its ability to compete in a changed world,” Arpey said. “I appreciate the Board’s confidence in me, but I also believe that executing on this plan requires a new leader for a new time. That is why I informed the Board of my decision to retire and, with my enthusiastic support, the Board decided to appoint Tom as CEO. It has been an honor to serve this company alongside the men and women of American Airlines who have met challenge after challenge with perseverance, skill, determination, and grace. I know they will continue to do so.”
AMR, American and AMR Eagle Holding Corporation (“American Eagle”), announced earlier today that in order to achieve a cost and debt structure that is industry competitive and thereby assure long-term viability and ability to continue delivering a world-class travel experience for customers, the Company and certain of its U.S.-based subsidiaries (including American and American Eagle), filed voluntary petitions for Chapter 11 reorganization in the U.S. Bankruptcy Court for the Southern District of New York.
Thomas W. Horton Background
Thomas W. Horton was named as Chairman and Chief Executive Officer AMR and American Airlines in November 2011. He was named President of AMR and American in July 2010. Previously, Horton served as Executive Vice President – Finance and Planning and Chief Financial Officer of AMR and American. He was named to that position in March 2006 upon returning to American from AT&T Corp., where he had been Vice Chairman and Chief Financial Officer.
Horton initially joined AMR in 1985 and held a range of senior financial positions with AMR, including Vice President and Controller. From 1998 to 2000, he was vice president responsible for the airline’s Europe business, based in London.
In January 2000, Horton became Senior Vice President and Chief Financial Officer of AMR.
In 2002, Horton joined AT&T, where he served first as Chief Financial Officer and then as Vice Chairman and CFO. In 2005, Horton led the evaluation of strategic alternatives, ultimately leading to the combination with SBC, which formed the new AT&T.
Horton holds an MBA degree from the Cox School of Business at Southern Methodist University and graduated with a BBA degree, magna cum laude, from Baylor University. Horton serves on the Board of Directors of Qualcomm, Inc., a leading developer and innovator of advanced wireless technologies and data solutions. He also serves on the Executive Board of the Cox School of Business at SMU.
Statement to AAdvantage Members
Dear AAdvantage® Member,
As you may know, on Tuesday, November 29, American Airlines filed for reorganization under Chapter 11. We took this action as part of our efforts to secure our long-term success in delivering the highest standards in air travel. We are committed to meeting your travel needs with outstanding customer service and safety, and it will be business as usual at American throughout our reorganization process. More than 80,000 people at American appreciate your loyalty and look forward to continuing to serve you.
We want to assure you that your AAdvantage® miles are secure. The AAdvantage miles that you’ve earned are yours and will stay yours, subject to usual policies, until you choose to redeem them for a great award with us. Likewise, your elite qualifying miles and your elite status, including lifetime status granted under the Million MilerSM program is secure and remains intact. You will continue to earn miles through all our existing AAdvantage participating companies and you will be able to redeem those miles for the same great awards — flights, upgrades, car rentals and hotels just to name a few. And, throughout the coming year, we will be adding even more opportunities to earn miles, as well as new ways to redeem those miles.
American is honoring all tickets and reservations as usual, and making normal refunds and exchanges. And, we intend to maintain a strong presence in domestic and international markets. As we and all airlines routinely do, we will continue to evaluate our operations and service, assuring that our network is as efficient and productive as possible. Additionally, relationships with our oneworld Alliance and other codeshare partners are continuing to provide you with opportunities to earn and redeem miles for travel to hundreds of destinations worldwide, and we are honoring all tickets and reservations for travel on our partner airlines as usual. For information about American’s reorganization process, please visit AA.com/restructuring.
Even more importantly, we remain committed to providing a superior customer experience with a focus on delivering what our customers value most — the newest fleet with our upcoming aircraft deliveries, network strength in the important cities of the world and world-class products, service and technology.
American Airlines has a proud history, and we will have a successful future. All of us on the American team thank you for your loyalty and we look forward to welcoming you aboard soon.
President — AAdvantage Loyalty Program
About American Airlines
American Airlines, American Eagle and the AmericanConnection® carrier serve 260 airports in more than 50 countries and territories with, on average, more than 3,300 daily flights. The combined network fleet numbers more than 900 aircraft. American’s award-winning website, AA.com®, provides users with easy access to check and book fares, plus personalized news, information and travel offers. American Airlines is a founding member of the oneworld® alliance, which brings together some of the best and biggest names in the airline business, enabling them to offer their customers more services and benefits than any airline can provide on its own. Together, its members and members-elect serve more than 900 destinations with more than 10,000 daily flights to 149 countries and territories. American Airlines, Inc. and American Eagle Airlines, Inc. are subsidiaries of AMR Corporation. AmericanAirlines, American Eagle, AmericanConnection, AA.com, and AAdvantage are trademarks of American Airlines, Inc. (NYSE: AMR).