AA in Chapter 11 - the madness of US law!

So American Airlines (AMR) have gone in to Ch11 bankruptcy protection, basically admitting that the company is no longer viable.

http://news.blogs.cnn.com/2011/11/29/am ... rotection/

What strikes me as complete madness is that 4 months ago they placed a $40billion order for over 450 new aircraft.

How is this method of doing business allowable? It seems that they'll ditch the CEO, screw the creditors and carry on trading happily ever after. Surely at some point a company has to fail, just as BA and VS would if the same happened to them?!
?|

It's not necessarily that AA is not viable, but it does have significant problems, including high labour costs and difficult union relations, poor strategy when competitors have merged and expanded, probably management errors and missed opportunities. However it has more than $4bn in the bank and this is one of the key ways to restructure debts and labour agreements to reduce cost. United did it, and today is healthy for example.

I might agree about Chapter 11 as a way to do what AA needs to do, that amounts to a failure of management, but in the British way, the company would have gone under with massive job losses, at least they have an opportunity to rebuild.

Slink - agree with you about job losses. Of course it's vital that those are minimised.

What does 'get my goat' is that the US airline industry seems to penalise those who stay out of bankruptcy by running their businesses well, because it gives them higher costs than their bankrupt competitors'.

It's almost as if the system rewards bad management and precludes competition.

Does this have any effect on the BA/AA alliance?

None whatsoever. It's absolutely business as usual.

There will no doubt be reductions in some schedules and older aircraft sent to the desert sooner as the Chapter 11 process takes place.