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American Airlines Files for Chapter 11 Bankruptcy Protection

American Airlines has filed for Chapter 11 bankruptcy protection.

Crushing debt, high fuel prices and expensive labor contracts overwhelmed American Airlines as the company filed for Chapter 11 bankruptcy protection on Tuesday.

The airline issued a statement to its AAdvantage members, reassuring them that it will be "business as usual at American."

"We want to assure you that your AAdvantage miles are secure...American is honoring all tickets and reservations as usual, and making normal refunds and exchanges." 

The company's CEO, Gerard Arpey, also stepped down on Tuesday.  His replacement, Thomas Horton, said American would probably cut its flight schedule "modestly" while it reorganizes, with corresponding cuts in jobs.  The airline said it would operate normally while reorganizing, adding that its AAdvantage frequent flier program would not be affected.

Horton said there was no single factor that led to the bankruptcy filing.  He said the company needed to cut costs in view of the weak global economy and high, volatile fuel prices.

American was the only major U.S. airline that did not file for bankruptcy after the Sept. 11, 2001 terrorist attacks that triggered a deep slump in the airline industry.  Delta, in 2005, was the last major airline to file for bankruptcy protection.

The president of the pilots' union, Dave Bates, said his members were concerned about what the bankruptcy will mean for them. Other airlines used bankruptcy to terminate pension plans.

"While today's news was not entirely unexpected, it is nevertheless disappointing that we find ourselves working for an airline that has lost its way," Bates said in a message to pilots.

Darryl Jenkins, a consultant who has worked for the major airlines, said the airline will be able to cut costs in bankruptcy and that employees and shareholders would be the big losers.

"Labor is going to take a major hit," Jenkins said. "Their pensions are in danger."

The Associated Press contributed to this story.


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