American Airlines Bankruptcy Essay Example | Topics and Well Written Essays - 750 words

American Airlines Bankruptcy - Essay Example The airline company which was known to be the worlds largest carrier five years ago was forced into bankruptcy on account of various reasons including mergers and acquisitions which significantly affected its business in terms of reduction in number of customers. The company’s position declined steadily from number one to number 3, over the years behind United Continental and Delta Airlines. Source: CBS News (2011a) Furthermore the profits of the company were steadily declining since a long time now. It reported profits in only one quarter during the entire year in 2007 and recorded losses amounting to approximately $4.8 billion over a period of 3-3.5 years. Various airline analysts and experts estimated these losses to either shoot up or continue throughout 2012 (CNN Money, 2011). The American Airlines have filed for Chapter 11 Reorganization for Industry Competitiveness, bankruptcy protection. This type of bankruptcy is usually used by companies which are struggling financially and have large public debts, in order to reorganize their business. Unlike the other types of bankruptcies the Chapter 11 Reorganization bankruptcy allows the company to seek help in reorganizing its business, by restructuring its debts; prevents the creditors from suing or selling off the debtors assets to pay off the debts; and have the opportunity to resume business and emerge from bankruptcy. (Elias, 2011). The board of Directors at AMR decided to file for bankruptcy under this category considering the best interests of its stakeholders and at the same time gain time to restructure its debts, costs and obligations (American Airlines, 2011). The American Airlines will continue to operate according to its normal flight schedules and no changes will be made in the customer reservations. The operations will resume as usual. The company is likely to honor tickets and