American Airlines' parent company AMR Corporation has filed for Chapter 11 bankruptcy protection.

The company expects the airline to continue to operate as normal throughout the bankruptcy process. Speculation about AMR's financial position surfaced in recent weeks after cost-cutting negotiations failed.
AMR said agreements with its workforce forced it to spend $600m (£384m, 450m euros) more than other airlines on staff costs.

The airline employs 78,000 staff worldwide and operates out of five major US hubs.

It was the only major US airline not to file for bankruptcy after the September 11th terrorist attacks.

Its competitors have successfully used bankruptcy to restructure their labour contracts and cut costs.


Changes at the board

The company also announced that Gerard Arpey, the Chief Executive of AA has retired and would be replaced by the company's president, Thomas Horton.

Mr Horton said the board had unanimously decided to file for bankruptcy on Monday night.

He insisted that the company would emerge in more robust health: "I am confident American will emerge even stronger as a global leader known for excellence and innovation."

He added however, that while the company goes through a restructuring it would reduce its flight schedule "modestly".

Mr Horton said no single factor had led to the decision to file for Chapter 11 but the company needed to cut costs. He pointed to weak demand and high fuel prices, which have risen more than 50% in the last five years.


British Airways

British Airways operates an international partnership with AA on transatlantic routes and are both part of the One World alliance.

American also has a joint venture with Japan Airlines.

British Airways' parent company IAG said in a statement: "We have every confidence in the future of American Airlines. We are pleased they are taking this step which shows commitment and determination.

The statement added: "Our joint business, which is a revenue sharing agreement, continues to operate as usual."


Reversal of fortune

American Airlines was the world's biggest airline only three years ago but has since fallen behind Delta and United after they bought out other airlines.

Unlike other major US airlines, AA has not returned to profit in the last two years.

AMR lost $162m in the third quarter of 2011 and has reported losses in 14 of the last 16 quarters.

AA was founded in 1930 from a combination of more than 80 smaller carriers and now flies nearly quarter of a million passengers per day.

(BBC news)