Thursday, 1 December 2011

American Airlines insist Boeing and Airbus order still 'rock solid'despite bankruptcy

American Airlines announced plans five months ago to buy 460 planes from Airbus and Boeing in a deal worth £24.7bn, with a further option to buy an additional 465 planes. Despite this weeks news of filing for financial protection, the airline insists that it will still proceed with the worlds largest order of commercial aircraft.

The airline filed for bankruptcy protection after it's fourth consecutive yearly loss attritubed to high fuel process and large staff costs. Commenting on the situation, Tom Horton, Chief Executive of American Airlines said - "When we're completed with this process, our company will be competitive and poised to grow and prosper and capitalise on these aircraft orders,"

Mr Horton's optimism is encouraging but the deal is likely to be out of his hands and at the mercy of a New York bankruptcy court. Part of the bankruptcy is the court's power to reaffirm or reject contracts that require spending a troubled company's money during the 18 months after Chapter 11 reorganisation.

Commeting on the likely outcome, Stephen Selbst of New York law firm Herrick, Feinstein LLP said: "The court would be extremely reluctant to approve entering into a new agreement at a time when the shape and direction of the reorganisation plan is uncertain."

It appears that American Airlines are in a problematic situation where their current fleet is inefficient and unattractive to consumers but need new planes to attract business and operate cost effectively.

Time will tell what will happen with the iconic airline.