American Airlines files for bankruptcy amid soaring costs and fuel prices

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AMERICAN Airlines and its parent company AMR Corp filed for bankruptcy yesterday in an attempt to cut costs and combat soaring fuel prices and dampened travel demand. American Airlines was once the largest US carrier, but is now third behind United Airlines and Delta Air Lines.

It had been the only major US airline to avoid a bankruptcy filing in the last decade and consequently has the industry’s highest labour costs.

The airline hopes bankruptcy will cut labour costs after it failed to reach a deal with pilots and other work groups after years of fruitless negotiations. Analysts question, however, whether restructuring under Chapter 11 of US Bankruptcy Code will address operational shortcomings and bolster revenue.

The filing also leaves AMR vulnerable to unsolicited takeover bids by rival airlines in the rapidly shrinking airline industry.

“It completes the cycle,” said Helane Becker, an analyst with Dahlman Rose & Co.

She added: “Every major airline in the united States has filed for Chapter 11.” AMR’s move comes on concerns of weaker travel demand, leading airlines to cut back service.

The company said that recent cost-cutting measures had been insufficient.