American Airlines Bankruptcy?

I am interested in what is happening over at American Airlines. Their shares fell 33 per cent yesterday as people expected the worst after a 62 percent drop so far this year. This last fall came amid fears that the airline could be forced into bankruptcy. Unlike most of the major airlines in the USA, American Airlines has avoided bankruptcy. This may change.
Currently, they are one of the airlines I dread flying. Despite being a One World airline, the difference between Cathay, Qantas, Lan and even British Airways is palpable.

They have very high debt levels ($17 billion), a higher cost base than other airlines in the USA, higher employee wages,  older (and tatty) planes (their average plane is almost 15 years old which means some are ancient) and a perception of inferior service – in a slow economy.

AA, of course are making changes:

  • In July, 2011, the airline placed the world’s largest plane order: 260 Airbus A320s and 200 Boeing 737s. This will help reduce their massive fuel bills by up to 25 per cent.
  • Bankruptcy may help them with staff costings and with refinancing their debt.  Their staff morale can’t get much lower (AA staff are some of the most negative and disempowered I have seen in the air).
  • Service  can’t get any worse. Bankruptcy may allow them to start again?

What do you see as the future of AA?

My ratings of American:
3 out of 5  over fourteen years

Positives:  Member One World, earn Qantas Frequent Flyer points, large US network, Dallas Hub

Negatives: see above

Would I fly them again? Reluctantly



Leave a Reply

Your email address will not be published. Required fields are marked *