Bankruptcy Leads to the World’s Biggest Airline

Bankruptcy has a nasty reputation.  When people hear the word “bankruptcy,” they tend to (incorrectly) imagine irreversible ruin, permanently scorched credit, and the beginning of the financial end.  This is a damaging myth about bankruptcy which runs directly counter to the truth, which is that bankruptcy is often the first step on the path to financial recovery.  Sometimes, bankruptcy is so powerful that it can save entire companies — and that is precisely what happened in the recent case of American Airlines, which, like a phoenix, has utilized the power of bankruptcy to rise out of the red and become a part of the world’s biggest airline company.


American Airlines Goes Bankrupt

Since the 1930s, American Airlines has shuttled billions of passengers across the skies and across the world.  But between the staggering costs of fuel, maintenance, construction, research, and testing, airlines are expensive companies to run.  In a post-9/11 landscape of crushing economic recession that discouraged (or even eliminated) non-essential and luxury spending, the experience of flying withered from luxurious to bare-bones, and the scale of travel plans around the country took a nosedive in deference to staples like rent, bills, groceries, and gas.

American Airlines’ parent company, AMR Corp., couldn’t take the strain forever.  In November of 2011, AMR Corp. filed for bankruptcy, with some $25 billion in assets — but $29 billion in debt.  For two years, American Airlines struggled with a lengthy financial reorganization, part of which called for mass employee layoffs and pension cuts (in a situation strikingly similar to Detroit’s current struggle).  But now, after 24 grueling months of financial planning, American Airlines has been approved for a merger with US Airways — a merger which will create the biggest airline in the world.


Bankruptcy Leads to Massive Merger with US Airways

Determined not to be dismantled by their bankruptcy, American Airlines sought approval for a merger with fellow industry giant US Airways.  However, the path to the merger was strewn with legal obstacles: namely, federal antitrust laws.  San Francisco attorney Joseph Alioto argued that if AA and US Airways were allowed to merge, the resulting company would seize control of approximately 80% of all air travel in the United States, effectively creating a monopoly — exactly what antitrust laws are in place to prevent.  Judge Lane, however, ruled against Alioto, on the basis that the merger would not cause “irreparable harm.”

This Monday, AA and US Airways officially announced their hard-won merger to the world — and with it, the birth of a new hybrid, American Airlines Group, Inc.  At over 100,000 employees with annual profits estimated to exceed $38 billion, American Airlines Group, Inc. will be the biggest airline, not just in the United States, but in the world.  Doug Parker, CEO of American Airlines, announced on Monday, “We are taking the best of both US Airways and American Airlines to create a formidable competitor, better positioned to deliver for all of our stakeholders.  We look forward to integrating our companies quickly and efficiently so the significant benefits of the merger can be realized.” He went on to say, “American has a tremendous legacy and knows what it feels like to be the best. The new American is about getting that feeling back.”

As this story goes to show, bankruptcy isn’t the end of financial success — it’s the beginning.  If you are interested in learning more about the benefits of filing for bankruptcy, contact our law offices online, or call us today at (800) 891-2657.