AMR Files for Bankruptcy: What Investors Need to Know

What's happening in the headlines can affect you as an investor. Here's what's going on, what you need to know, and what you should do.

The cold, hard facts
(NYS: AMR) , the parent company of American Airlines, has filed for bankruptcy protection. The company also said Gerard Arpey, the company's chief executive, would retire and be replaced by the current president, Tom Horton.

Some context
AMR has been struggling financially, and trying to avoid bankruptcy, for years. In the meantime, many of its rivals took advantage of bankruptcy protection as a way to shed burdensome pension plans and reduce structural costs. Many of these carriers have returned to profitability as a result, while American Airlines has not.

Carriers who have filed previously include:

  • US Airways (NYS: LCC) in 2002 and 2004.

  • United Continental Holdings (NYS: UAL) in 2002.

  • Delta Air Lines (NYS: DAL) in 2005.

AMR said that while this move was difficult, it was also necessary and would allow the carrier to become more competitive. American Airlines expects to continue operating as normal throughout bankruptcy proceedings.

What you need to know
This filing ends months of speculation about the carrier's future. Since the beginning of the year, the stock has lost nearly all of its value. At the time this article is being written, the stock is trading at $0.31 per share.

Unfortunately, with the company going into Chapter 11, AMR's shares will likely be canceled, wiping out all shareholder value. I'd sell what you can as soon as you can. While $0.31 per share is a miserable price, it's better than zero.

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At the time thisarticle was published Fool contributor John Grgurich loves the smell of newsprint in the morning, but he owns no shares of any of the companies mentioned above. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a scintillating disclosure policy.

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