The Bankruptcy of American Airlines

Andrew Rivkin saw this headline coming miles away. With most of the major North American airlines having gone through bankruptcy in the past decade it was only time before American Airlines faced the same challenge. American maintained a steady-course while its competitors such as United Airlines and Delta Airlines went through bankruptcy, restructuring and mergers. Andrew Rivkin notes that through all of the restructuring of U.S. airlines, American Airlines went from being the largest to third largest behind the newly formed Delta Airlines and Continental Airlines. American’s loss of market-share came from the merger between Delta Airlines and Northwest Airlines as well as the merger between Continental Airlines and United Airlines.

Andrew Rivkin: American Airlines Boeing 757

An American Airlines Boeing 757 during takeoff

Before Tuesday’s filing, American, Jetblue and Southwest were the only major U.S. airlines that had not filed for bankruptcy reorganization. Based on the low-cost model of Jetblue and Southwest, Andrew Rivkin believes that these two airlines will avoid the necessity for filing for Chapter 11 protection. While the stocks of both of these no-frills airlines have lost some value in the past year, it is nothing compared to the hit that American Airlines stock has taken.

Since 2007, American has only reported a profit in one quarter and has lost close to $5 billion over the past three years. Andrew Rivkin points to the modernization of the airlines fleet over the next few years as a key part of its restructuring plan. American’s current fleet includes close to 250 MD-80 airplanes that haven’t been manufactured since 1999 and are considered to be serious gas-guzzlers. With fuel costs accounting for a significant portion of airlines overall costs, American’s fleet modernization will surely help the airline in its plans to once again becoming a profitable corporation.

Check out the full article: American Airlines Files for Bankruptcy on CNN.com

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