(Image source: American Airlines)
 

BY MALLORY PERRYMAN
ANCHOR MEGAN MURPHY

Sky high labor costs--rising fuel prices--and mounding debt.

It’s enough to plunge American Airlines’ parent company AMR into bankruptcy. Here’s Fox News.

“American Airlines has just filed for Chapter 11 bankruptcy and plans to begin reorganization immediately. Moments after the news broke, we learned that CEO Gerard Arpie has agreed to step down. He'll be replaced by the company president Thomas Horton… Bankruptcy blamed on the slow economy and reduced demand for seats.”

For the airline-- Chapter 11 means it can seek court protection to reduce costs and debt. For the consumer-- CNN explains-- it doesn’t mean much of anything.

Richard Quest: “Yeah, look, you know, it's rare that I put my neck on the block. But I’m going to do it quite clearly. There is no danger that American Airlines is going to stop flying. Let's be absolutely clear… Horton told me he hopes that Chapter 11 will last less time than the average being 16 months.”

According to the Economist-- bankruptcy is pretty run-of-the-mill in the airline industry- and American’s parent company AMR is one of the few that has historically resisted getting help from bankruptcy laws.

“Network airlines are, in America and much of the rich world, licences to lose money or make miserly returns—and AMR is no exception. It has lost money in all but two of the past ten years, and was expected to run up more losses this year and next.”

Despite plummeting profits-- a financial analyst on CNBC says- clients are always asking him about investing in the airline industry. Here’s why.

Host: “Why do you think that is? Why do you think there's this fascination with the airline stocks as an investment?

Analyst: “Because anybody who travels, you can't get on the darn plane. They're always filled. They’re always filled.”

Host: “You gotta pay for your bags. You gotta pay for your food. You gotta pay for pillows and blankets so I guess the logical conclusion would be that that is, that that makes money. But in reality, it’s the labor costs that eat up all that money.”

And it’s those labor costs that stand to get the biggest makeover during the restructuring process. That’s according to a blogger for the Austin American-Statesman, who notes...

“A bankruptcy court will allow [American] to shed some debt and will put pressure on labor unions to agree to some cuts. In all likelihood, AA will emerge from bankruptcy with changes in its employee compensation, and that could mean cranky AA flight attendants, gate agents and such...”

ABC reports-- American has been in talks with unions representing many of its employees for more than four years.