American Airlines in bankruptcy

Nov 30 2011 - 12:10am

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American Airlines used to bill itself as "something special in the air," and it was.

It was the first airline to offer curbside check-in. The first with computerized reservations. It invented the frequent-flier program and came up with the deeply discounted Super Saver fare to fill empty seats on its planes.

But it was disastrously behind on one thing -- recognizing that its finances were unsustainable.

In the past decade, other airlines cut expenses in bankruptcy reorganizations. American plodded along with high labor costs and aging, gas-guzzling jets. Other airlines found merger partners. American was the awkward kid at the middle school dance.

American was left with little spare cash to make improvements or take risks. The money ran out, and on Tuesday, the time did, too. American filed for Chapter 11 bankruptcy reorganization.

"They were the most innovative airline for years. Nobody could touch them," says George Hobica, who runs Airfare Watchdog, a site that alerts fliers to discount fares. "They're a shadow of their former self."

Some of American's 78,000 workers will almost certainly lose their jobs or have their pay or pensions cut. Its creditors will lose money. And its stockholders will be wiped out. The stock, which traded above $40 in 2007, closed Tuesday at 33 cents.

The bankruptcy filing is a black mark for American, which traces its routes to carrying mail for the government in the 1920s and was, in the decades between, a pioneer in the nation's skies.

"American Airlines is a link to the way travel used to be," said Edward Pizzarello, a 37-year-old executive with a private equity firm who has more than 500,000 lifetime miles with the airline. "It reminds me of a time when people got dressed up in their Sunday best to hop on a plane and fly around the world."

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