American Airlines Asks for More Time in Heated Bankruptcy Case
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American Airlines Asks for More Time in Heated Bankruptcy Case

October 26, 2012


AMR Corp., the parent company of American Airlines, asked a bankruptcy judge for a 30-day extension last week, according to a Reuters report, prolonging a bankruptcy case featuring high tensions between labor and management.

Sources say AMR asked its bankruptcy court for an extended period of time in which to craft a coherent bankruptcy exit plan. Specifically, the airline giant wants more time to create a restructuring plan without outside influence from its creditors.

The company filed for bankruptcy nearly a year ago in an effort to reduce its high labor costs, which are generally loftier than the industry standard, according to sources.

And AMR is determined to leave bankruptcy court with its company intact, but competing airlines have other plans, which has complicated the bankruptcy process.

According to industry observers, smaller competitors, particularly US Airways Group, are making a valiant effort to acquire American Airlines while its parent company is still in bankruptcy protection.

The recent move by AMR’s lawyers represents a thinly veiled effort to keep such competitors at bay, sources indicate.

If AMR is successful in extending its "exclusivity period" by 30 days, it will have an extra month to create a bankruptcy plan without being influenced by creditors like US Airways, which cleverly purchased some of AMR’s debt so it could have a seat at the bankruptcy table.

During this period, any takeover plan presented by US Airways or another airline would have to receive the explicit approval of AMR and its top officials. But if the bankruptcy judge declines AMR’s request, then the company could be subject to the whims of its aggressive creditors.

Sources, however, say that the extension request suggests that the completion of a plan is still weeks away, and that discussions between AMR and its competitors have remained "generally cooperative."

In its court filing, for example, AMR claimed that it and its creditors have made a great deal of "good faith progress" and have created a "collaborative, cooperative, viable working relationship" with its creditors.

Of course, whether these "good faith" negotiations will result in a mutually beneficial agreement remains to be seen.

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