AMR seeks bankruptcy funding.
10 March:
DALLAS (Reuters) - The union representing flight attendants at American Airlines said it sees the world's largest carrier filing for bankruptcy "sooner rather than later."
Meanwhile, American Airlines has quietly begun talks on Wall Street seeking up to $2 billion in bankruptcy financing should a Chapter 11 filing become necessary, a source familiar with the matter said Monday.
"APFA has reason to believe that the timing for an AMR bankruptcy may be sooner rather than later," Association of Professional Flight Attendants President John Ward said, adding that his union plans to meet with airline management in order to hammer out a relief package for the carrier.
Shares of American Airlines parent company AMR Corp. (AMR: down $0.39 to $2.42, Research, Estimates) shed more than 13 percent by midafternoon on the New York Stock Exchange.
Ward said in a communication with union members over the weekend that it is in the best interest of the union to do everything possible to avoid an AMR bankruptcy.
"This certainly is not a position we would choose to be in. However, the situation is what it is and an AMR bankruptcy filing would only make this difficult situation worse," Ward said.
When contracted by CNNfn, American said "time is of the essence and [American] is committed to working with its union leaders and employee groups to quickly find mutually acceptable solutions to its situation."
A source told Reuters Monday that the airline already is trying to negotiate bankruptcy financing.
"They're starting out with a very high, unreasonable request to raise $2 billion," said the source, who declined to be identified.
A spokesman for American declined to comment on the talks, which are said to be taking place with a number of financial institutions.
Several sources said the talks are in the preliminary stages and would involve the usual range of lenders to large bankruptcy cases, including Citigroup, J.P. Morgan Chase, CIT Group and perhaps Boeing Co. Citibank offers a credit card linked to American's frequent flyer program.
Ray Neidl, airline analyst with Blaylock & Partners, said he doesn't believe that AMR searching for bankruptcy financing is a sign that a filing is imminent.
"I think they're just getting ready for the war," he said. "Absent any major, unexpected negative impact from the war, I think they've got until the summer until they're facing a filing. I think they want to give employee groups until then to come up with the necessary savings. It seems like they're making progress there."
Late last month credit rating agency Standard & Poor's downgraded AMR's debt further into junk bond status, but it said at that time that the airline was looking at a possible mid-year bankruptcy filing.
"The downgrade reflects continuing heavy losses and diminishing liquidity, with the potential for a voluntary bankruptcy filing by midyear if American is not able to negotiate significant concessions from its labor groups," S&P analyst Philip Baggaley said in a statement Feb. 28.
AMR posted a record $3.2 billion net loss in 2002 and has outlined a goal to cut $4 billion in annual costs to stay afloat. It has hired bankruptcy lawyers and a financial advisory firm, sources have told Reuters.