AMR files for bankruptcy protection

American Airlines' parent company AMR filed for Chapter 11 bankruptcy on Tuesday, as the troubled firm moved to put its finances in order while keeping planes in the sky and passengers in seats.

"Chapter 11 reorganisation is in the best interest of the company and its stakeholders," the firm said in an early-morning statement, which also announced the departure of chairman and chief executive Gerard Arpey.

The airline said it hoped the move would help it secure "long-term viability" by improving costs and reducing its debt burden while staying in business.

The filing will allow the Texas-based carrier, which has extensive routes within the United States and the Americas, to restructure with more legal room-for-maneuvre to renegotiate or cancel service and wage contracts.

"This was a difficult decision, but it is the necessary and right path for us to take -- and take now -- to become a more efficient, financially stronger, and competitive airline," said president Thomas Horton who was named as Arpey's replacement.

The airline, which serves 260 cities through a network that reaches 50 countries and territories, insisted it would continue "normal business operations."

But that claim was slapped down by some industry analysts.

"Cuts will come: They've said everything is normal for now, but the cutting will surely start soon. They'll reduce aircraft, employees and routes," said Seth Kaplan of Airline Weekly.

"Look for American hubs like Dallas and Miami, where AA has a good competitive position, to escape relatively unscathed. Los Angeles and even Chicago, on the other hand, could be more vulnerable."

Rumors had swirled for months that AMR would file for bankruptcy protection, after an unusual spike in pilot retirements, with the pilots trying to sell off their own stocks in the company.

Shares in AMR have plunged 35 per cent since the beginning of November, leaving the stock at $1.62 before US markets opened Tuesday. At that price, the company has a market value of some $543 million.

That value looked set to be further eroded in Tuesday trade on Wall Street, which promised to be a bloodbath.

In pre-market trading the airline's shares were down 60 percent on Monday's closing price.

Kaplan said the timing of the filing was a surprise.

"They had enough cash to wait but clearly realized their situation was unsustainable and would only deteriorate further by waiting."

The move will fuel speculation that American Airlines will look for a merger in an industry that has seen a swathe of consolidation in recent years and regularly suffers from oil or other shocks.

American's long-rumored suitor and Oneworld partner International Airlines Group -- the holding company that runs British Airways and Iberia -- offered its support.

"We have a successful joint business together and believe that this will provide us with an opportunity to get stronger," said IAG said in a statement.

"We have every confidence in the future of American Airlines. We are pleased they are taking this step which shows commitment and determination."

Most of the best-known US airlines have filed for bankruptcy at some point since 1978, according to data from the Air Transport Association. Most have emerged from bankruptcy with the notable exception of PanAm, which collapsed in 1991.

Continental filed for chapter 11 in 1990 and Hawaiian Airlines in 1993, launching a decade of relative stability that would end with the September 11 attacks, which slowed air travel considerably.

Post 9/11 Hawaiian Airlines, United Airlines, US Airways (twice), Northwest Airlines and Delta Air Lines have all filed for Chapter 11 protection.

But the filing could still have a knock-on effect across the economy.

In July, American Airlines, which with sister American Eagle has a fleet of 900 planes, said it would buy 200 Boeing 737s and 260 Airbus A320 jets, both more fuel efficient than the aircraft it currently operates.

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