One of South Florida’s largest employers, American Airlines is also the main airline for bringing tourists to the area. The airline’s future is in question now that American Airlines’ parent has recently filed for bankruptcy protection under Chapter 11.
During the difficult economic climate and its effect on Florida’s tourism industry, American Airlines has been one of the vital factors leading towards rectifying the situation.
However, because of its inability to cut costs and lower its debt, American Airlines’ parent company, AMR Corp., is hoping to reorganize its airline business. The airline has only reported an annual profit once since 2000.
Things became especially difficult this year for the airline when the price of fuel surged. This resulted in a 40 percent increase in fuel expense over last year. Unfortunately, this year the company lost about $3 million a day.
Once in bankruptcy, AMR may be more successful in achieving necessary cuts. This is because negotiations with creditors and labor unions may be more fruitful now that the company is in federal bankruptcy.
Among American Airlines’ largest creditors is Hewlett-Packard, which is owed $30 million, followed by Miami-Dade County, holding $29 million of AMR’s debt. Miami-Dade was obligated to take over a building project at Miami International Airport when American Airlines was struggling with finances and construction delays.
Though in bankruptcy, the airline wants flyers to feel confident about continuing to fly with them during the reorganization. Apparently, American Airlines has approximately $4 billion in cash to keep the company running as usual during the bankruptcy proceeding.
In particular, American Airlines is aiming for Miami International Airport in South Florida to remain as one of its key hubs, even after its bankruptcy proceeding. This is because the airline sees Florida as its gateway to Latin America, and a key to the future of its success after its reorganization and its exit from bankruptcy.
Source: Miami Herald, “American Airlines bankruptcy rattles key tourism driver for South Florida,” Douglas Hanks, Nov. 29, 2011