American Airlines parent seeks Ch. 11 protection

(AP) - American Airlines and its parentcompany are filing for bankruptcy protection as they seek to cutcosts and unload massive debt built up by years of high jet fuelprices and labor struggles.

The third-largest U.S. airline also said Tuesday that CEO GerardArpey had stepped down and was replaced by company president ThomasW. Horton.

AMR Corp. has continued to lose money while other U.S. airlinesreturned to profitability in the last two years.

Horton said the board of directors unanimously decided to filefor bankruptcy after meeting Monday in New York and again byconference call on Monday night.

American said it would operate normally while it reorganizes inbankruptcy. The airline said it would continue to operate flights,honor tickets and take reservations. It said the AAdvantagefrequent-flier program would not be affected.

Horton said, however, that as the company goes through arestructuring it will probably reduce the flight schedule"modestly," with corresponding cuts in jobs.

The company will delay the spin-off of its regional airlineoperation, American Eagle, which was expected in early 2012. AMREagle Holding Corp. also filed for bankruptcy.

American was the only major U.S. airline that didn't file forbankruptcy protection in the aftermath of the 2001 terroristattacks that triggered a deep slump in the airline industry. Thelast major airline to file for bankruptcy protection was Delta in2005.

Speculation about an AMR bankruptcy grew in recent weeks,however, as negotiations with pilots and other workers overcost-saving labor contracts seemed to stall. The company said thatlabor-contract rules forced it to spend at least $600 million moreper year than other airlines.

Horton said, however, that there was no single factor that ledto the bankruptcy filing. He said the company needed to cut costsin view of the weak global economy and high, volatile fuel prices.The average price of jet fuel has risen more than 50 percent in thepast five years.

American was the world's biggest airline as recently as 2008,but has fallen behind United and Delta after those two companiesbought other airlines.

Fort Worth-based AMR lost $162 million in the third quarter andhas posted losses in 14 of the last 16 quarters.

AMR has about $4 billion in cash and has announced plans toorder 460 new narrow-body planes used primarily in the U.S., plusother jets for longer flights.

American was founded in 1930 from the combination of more than80 smaller carriers. It now flies about 240,000 passengers per dayand has about 78,000 employees.

The airline operates out of five major hubs in New York, LosAngeles, Dallas/Fort Worth, Chicago, and Miami. It has majorinternational partnerships with British Airways and Japan Airlines.

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