AMR Corp., the Fort Worth-based air carrier and the parent company of American Airlines, filed for Chapter 11 business bankruptcy in November 2011. Since then the company has posted some of its best fiscal quarters, including a net income of $220 million from April to June 2013, its first reported second quarter profit since 2007. AMR also announced recently a merger with US Airways which will take place when the company emerges from Chapter 11 proceedings, hopefully around Labor Day. The merger will result in a new company, American Airlines Group, and a new success story for Chapter 11 filing.
A Business Bankruptcy Success Story
Many businesses have successfully emerged from business bankruptcy proceedings, such as the Sbarro’s pizza restaurant and Marie Callender’s. AMR Corp. looks to be the latest such case. Chapter 11 business bankruptcy allows for a reorganization of debt and a repayment schedule that ensures the business’s secured creditors of repayment in full over time, while unsecured creditors receive percentage repayments which can vary from case to case.
For AMR, the filing forced employees to accept large pay cuts, cuts in benefits, and changes to working conditions as part of the restructuring process, which included a $2 billion cost cutting plan.
AMR stakeholders, most of whom are unsecured creditors, will vote on the company’s reorganization plan in the coming weeks. If the plan is approved, there is an August 15 hearing scheduled with U.S. Bankruptcy Judge Sean Lane, which will determine whether AMR is given the go-ahead to exit bankruptcy. If Lane does give his approval, AMR and US Airways will complete their merger. US Airways is expected to report profit around $310 million in the upcoming quarter. Assuming that AMR’s second quarter profits are the sign of the company’s upward trend, it could well mean another success story for Chapter 11 business bankruptcy filing.