To say I wasn't surprised would be a lie, but I thought it wouldn't be for another few months.
The market awoke to news this morning that American Airlines and American Eagle parent AMR
Business as usual for airlines
The primary reason for the bankruptcy filing was out-of-control labor costs that gave AMR a disadvantage over nearly all of its competitors. This $800-million-a-year cost disadvantage combined with the inability to restructure debt led to the Chapter 11 filing. Despite these debt costs, AMR plans to go ahead with its recent order of 460 new planes, including 200 new 737s from Boeing. These planes are needed to update its aging fleet, though it feels strange for a company to buy brand new jets while losing $4.8 billion over the past three and a half years, with losses expected to continue through at least 2012.
Not all airlines are created equally
Despite industrywide profitability problems, there are a few bastions of hope away from the major carriers. Last year marked the 38th consecutive year that Southwest Airlines
What's ahead for AMR?
While I don't think this bankruptcy will eliminate American Airlines as a major carrier, the possibility exists. Other major airlines such as Delta Air Lines
It wasn't that long ago that American Airlines was the largest carrier in the world. I don't think that will happen again anytime soon, though it is possible for it to look for another airline to merge with.
These things take time to resolve, so if you want to follow the latest developments, add AMR to your free My Watchlist.
Fool contributor Robert Eberhard holds no position in any company mentioned. The Motley Fool owns shares of Allegiant Travel. Motley Fool newsletter services have recommended buying shares of Southwest Airlines. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.