Merger talks surface in American Airlines Chapter 11 bankruptcy

Many travelers flying into and out of Chicago use American Airlines, which operates one of its hubs out of O'Hare International Airport. That company's parent, AMR Corp., entered Chapter 11 bankruptcy last fall, and is currently in the process of restructuring its business operations in order to cut costs. The company wants to create new agreements with its unionized workers, and now reports have surfaced that a merger could become part of the bankruptcy process.

AMR Corp. has staunchly denied that it would merge with another airline during bankruptcy, however. The company has stated that its goal is to emerge stronger and leaner from Chapter 11 without merging. But it appears that the unions support a merger because it could result in fewer job cuts.

According to the airline, it must reduce its annual operating expenses by approximately $2 billion. Diminishing the size of its labor force will constitute a significant portion of that amount--more than $1 billion--as the company plans to let 13,000 of its unionized employees go.

Union leaders have argued, however, that a merger could potentially save thousands of those jobs. US Airways has been cited as a possible suitor in a merger deal. An unnamed source has said that AMR Corp. will investigate the benefits of a merger at the behest of creditors, but has not reached any agreement with another airline.

The airline is a large company, counting roughly 74,000 people among its employees. It faces some challenges unique to the sector in which it operates, but bankruptcy offers it, as it offers other businesses, the chance to meet financial challenges, discharge debt and rescale operations.

Source: Chicago Tribune, "AMR said to be weighing merger with US Airways," May 11, 2012.

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