American Airlines parent seeks bankruptcy

The parent company of American Airlines filed for bankruptcy protection yesterday, seeking relief from crushing debt, high fuel prices and expensive labor contracts its competitors shed years ago.

The company also replaced its chief executive, and the incoming leader said American would probably cut its flight schedule "modestly" while it reorganizes. He did not give specifics. American said its frequent-flier program would be unaffected.

AMR Corp., which owns American, was one of the last major U.S. airline companies that had avoided bankruptcy. Competitors used bankruptcy to shed costly labor contracts, unburden themselves of debt and start making money again. Delta was the last major airline to file for bankruptcy protection, in 2005.

American -- the nation's third-largest airline and proud of an 80-year history that reaches back to the dawn of passenger travel -- was stuck with higher costs and had to match its competitors' lower fares or lose passengers.

Other airlines also grew by pursuing acquisitions and expanding overseas. American was the biggest airline in the world in 2008 but has been surpassed by United, which combined with Continental, and Delta, which bought Northwest.

In announcing the bankruptcy filing, AMR said Gerard Arpey, CEO since 2003, had stepped down and was replaced by Thomas W. Horton, the company president. With reductions to the flight schedule, Horton said there would probably be corresponding job cuts. American has about 78,000 employees and serves 240,000 passengers per day.

American said it would continue to operate flights, honor tickets and take reservations.

AMR stockholders almost certainly will be wiped out. The stock fell to 26 cents yesterday, down $1.32. In January 2007, after a four-year rally, shares were worth more than $40.