This morning's news about American Airlines is almost anti-climatic — the airline's parent company, AMR, has filed for Chapter 7 bankruptcy protection. In the past ten years AMR has made a profit only twice. It has lost money for the past three years in a row.
American flies from Springfield to Chicago and Dallas. What does today's news mean for that service? Probably not much. Bankruptcy proceedings in the airline industry are old hat. In the past ten years we've lived through the bankruptcies of United and Delta without a hiccup. American says it intends to do the same—customers should see little, if any, difference. The fact that American has $4.1 billion in cash should help things out...
Based on our analysis of American's service in Springfield, we expect no changes. That being said, we'll definitely be monitoring things closely. I've had more than one person ask why the airlines have such a hard financial time?
It's a brutal, cut throat business, with very small margins. And despite what you hear on the news all the time, the airlines are not making money hand-over-fist. It seems that bankruptcy has almost become an acceptable means of getting an airline's financial house in order. United did it; so did Delta. Both emerged from the process in much better long-term financial shape. The process allowed them to shed costs, and renegotiate labor contracts. American, as you may know, has had a heck of a time making its unions happy.