Post-bankruptcy American Airlines enters new stage of life

| Dec 9, 2013 | Bankruptcy |

It’s official. American Airlines has been reborn. As of this morning, Dallas-based American and US Airways were consolidated into what is the world’s largest airline. The company is retaining the American Airlines name, but its executive team will be comprised mainly of US Airways leaders. Former US Airways CEO Doug Parker becomes CEO of the new entity.

The merger also happens to mark the emergence of American from Chapter 11 bankruptcy protection. Indeed, the merger was presented as being a central element to the successful completion of the bankruptcy case. Readers of this blog may recall that we wrote about this back in September. At the time, we observed how important timing is in the filing of bankruptcy, whether it involves a business or personal bankruptcy.

To catch readers up, American Airlines filed for reorganization under Chapter 11 bankruptcy just over two years ago. The move followed four straight years of losses. At the time of its filing, it listed having $24 billion in assets and a debt load of $29 billion.

The merger with US Airways was seen by many as key to the company’s survival. Creditors and employees of the companies approved the union, but it was opposed by some private groups and the federal government on antitrust grounds. Two weeks before an antitrust trial was to start last month, however, a settlement was reached, clearing the way for the merger.

As part of that, American has been able to restructure its operations. Labor costs are being reduced to a point where the company reports it has trimmed $2 billion from its bottom line while increasing projections on revenues.  

Airline industry analysts caution that the merger won’t be seamless. They say a lot has to happen and could take up to two years before it’s completed. First changes are expected in early January when the company says customers will be able to start redeeming frequent flyer miles on either carrier. Pending final integration, though, the company says the two carriers will continue to operate separately.

Source: WFAA.com, “American Airlines closes merger, remotely opens NASDAQ trading,” Jason Whitely, Dec. 9, 2013