Dear Valued Aircraft Lessors, Lenders and Trustees:
As you may have heard, AMR Corporation (the “Company”) announced today that in
order to achieve a cost and debt structure that is industry competitive and thereby
assure its long-term viability and ability to continue delivering a world-class travel
experience for its customers, it and certain of its U.S.-based subsidiaries (including
American Airlines, Inc. (“American”) and AMR Eagle Holding Corporation (“American
Eagle”)), filed voluntary petitions for Chapter 11 reorganization in the U.S. Bankruptcy
Court for the Southern District of New York.
As we have made clear with increasing urgency in recent weeks, we must address our
cost structure, including labor costs, to enable us to capitalize on the foundational
strengths we have put in place already and secure our future. Our very substantial cost
disadvantage compared to our larger competitors, all of which restructured their costs
and debt through Chapter 11, has become increasingly untenable given the accelerating
impact of global economic uncertainty and resulting revenue instability, volatile and
rising fuel prices, and intensifying competitive challenges. Our Board decided that it was
necessary to take this step now to restore the Company’s profitability, operating
flexibility, and financial strength.
We are committed to working as quickly and efficiently as possible to appropriately
restructure the Company so that it can emerge from Chapter 11 well-positioned to
assure its ability to compete effectively in the marketplace.
We cannot afford to retain all the aircraft currently in the American and American Eagle
fleets at their current rates, and so we have no choice but to make substantial
reductions in the cost of the aircraft which we retain. Moreover, in view of the large
number of aircraft we have on order from Airbus and Boeing, we also seek to accelerate
our fleet renewal strategy and, as a result, we do not require the use of all aircraft
currently in our fleets. Additionally, to conserve our liquidity, subject to the
requirements of the U.S. Bankruptcy Code, during the 60-day Section 1110 period, we
plan to make payments when due of aircraft rent and mortgage principal and interest
payments only on certain aircraft in our fleets.
We have been developing a comprehensive plan which re-values aircraft based on
current values, taking into account required maintenance, the need to phase out older
types and desired fleet efficiencies. We will be sending proposals to many of our
aircraft lessors, lenders and trustees soon.
To ensure that you have sufficient time and information to evaluate and respond to
these proposals, we recommend that any party having an interest in an American or
American Eagle aircraft communicate with one of the contacts listed on the attachment,
providing us with specific information about the aircraft in which such party holds an
interest, the nature of that interest as well as that party’s contact information. We will
rely, at least initially, almost exclusively on electronic communication.
We appreciate your cooperation as we face the enormous task of working with a large
number of our aircraft lessors, lenders and trustees in a timely manner. Please
understand that it is early in the process, and many details are still being worked out.
What I am able to tell you now is that some aircraft leases will be rejected soon while
others may be rejected later. Some transactions will be subject to Section 1110(a)
elections near the end of the 60-day Section 1110 period.
As you may have heard, AMR Corporation (the “Company”) announced today that in
order to achieve a cost and debt structure that is industry competitive and thereby
assure its long-term viability and ability to continue delivering a world-class travel
experience for its customers, it and certain of its U.S.-based subsidiaries (including
American Airlines, Inc. (“American”) and AMR Eagle Holding Corporation (“American
Eagle”)), filed voluntary petitions for Chapter 11 reorganization in the U.S. Bankruptcy
Court for the Southern District of New York.
As we have made clear with increasing urgency in recent weeks, we must address our
cost structure, including labor costs, to enable us to capitalize on the foundational
strengths we have put in place already and secure our future. Our very substantial cost
disadvantage compared to our larger competitors, all of which restructured their costs
and debt through Chapter 11, has become increasingly untenable given the accelerating
impact of global economic uncertainty and resulting revenue instability, volatile and
rising fuel prices, and intensifying competitive challenges. Our Board decided that it was
necessary to take this step now to restore the Company’s profitability, operating
flexibility, and financial strength.
We are committed to working as quickly and efficiently as possible to appropriately
restructure the Company so that it can emerge from Chapter 11 well-positioned to
assure its ability to compete effectively in the marketplace.
We cannot afford to retain all the aircraft currently in the American and American Eagle
fleets at their current rates, and so we have no choice but to make substantial
reductions in the cost of the aircraft which we retain. Moreover, in view of the large
number of aircraft we have on order from Airbus and Boeing, we also seek to accelerate
our fleet renewal strategy and, as a result, we do not require the use of all aircraft
currently in our fleets. Additionally, to conserve our liquidity, subject to the
requirements of the U.S. Bankruptcy Code, during the 60-day Section 1110 period, we
plan to make payments when due of aircraft rent and mortgage principal and interest
payments only on certain aircraft in our fleets.
We have been developing a comprehensive plan which re-values aircraft based on
current values, taking into account required maintenance, the need to phase out older
types and desired fleet efficiencies. We will be sending proposals to many of our
aircraft lessors, lenders and trustees soon.
To ensure that you have sufficient time and information to evaluate and respond to
these proposals, we recommend that any party having an interest in an American or
American Eagle aircraft communicate with one of the contacts listed on the attachment,
providing us with specific information about the aircraft in which such party holds an
interest, the nature of that interest as well as that party’s contact information. We will
rely, at least initially, almost exclusively on electronic communication.
We appreciate your cooperation as we face the enormous task of working with a large
number of our aircraft lessors, lenders and trustees in a timely manner. Please
understand that it is early in the process, and many details are still being worked out.
What I am able to tell you now is that some aircraft leases will be rejected soon while
others may be rejected later. Some transactions will be subject to Section 1110(a)
elections near the end of the 60-day Section 1110 period.
