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67-536: The company merged with AMR Corporation ; the combined business began trading under the new name of American Airlines Group on December 9, 2013. The combined airlines formed the largest airline in the world. US Airways' CEO, Doug Parker , became CEO of the new company. US Airways traces its history to All American Aviation Inc , a company founded in 1939 by du Pont family brothers Richard C. du Pont and Alexis Felix du Pont, Jr. Headquartered in Pittsburgh ,

134-585: A Delaware corporation , its name derived from American Airlines's former ticker symbol on the New York Stock Exchange . In 1984, various subsidiaries previously owned by American Airlines merged and created AMR Energy Corporation; it was involved in creating oil and natural gas resources. In 1986, AMR announced that it would be acquiring Air California 's parent company, ACI Holdings, for $ 225 million. In 1994, AMR succeeded in achieving profitability, after failing to produce it for three years in

201-403: A valuation of the reorganized business. Bankruptcy valuation is often highly contentious because it is both subjective and important to case outcomes. The methods of valuation used in bankruptcy have changed over time, generally tracking methods used in investment banking, Delaware corporate law, and corporate and academic finance, but with a significant time lag. Chapter 11 retains many of

268-410: A July 12 court filing US Airways said it supported an American Airlines request to extend a period during which only American could file a bankruptcy reorganization plan ("exclusivity period"); in the filing US Airways disclosed that it was an American Airlines creditor and "prospective merger partner. On August 31, 2012, US Airways CEO Doug Parker announced that American Airlines and US Airways had signed

335-534: A deadline of February 1 for Delta's creditors committee to move forward with the deal. The move was made, according to US Airways president Scott Kirby, to remove any doubt that the US Airways offer was the best one on the table. On January 31, 2007, following a decision by the creditors committee to support Delta's standalone reorganization plan, US Airways withdrew its merger offer. In January 2012, US Airways expressed interest to take over American Airlines and

402-518: A firm commitment from Citibank to provide financing for both the cash portion of the merger offer, as well as the required secured loan refinancing at both airlines. The combined airlines would have flown under the Delta Air Lines name. Delta Air Lines repeatedly stated its intentions of exiting bankruptcy as a stand-alone carrier. On December 19, 2006, Delta's Board of Directors officially rejected US Airways offer. The final decision, however,

469-469: A five-story townhouse, London Residence LON6526, in Cottesmore Gardens, Kensington , London . As of 2011, it is worth $ 30 million U.S. dollars. Many large companies own or rent property for use of executives who are working abroad. When AMR Corporation requested Chapter 11 bankruptcy protection, LON6526 was one of the eight owned properties the company declared. The airline purchased

536-473: A motion to convert to chapter 7 or appoint a trustee if either of these actions is in the best interest of all creditors. Sometimes a company will liquidate under chapter 11 (perhaps in a 363 sale), in which the pre-existing management may be able to help get a higher price for divisions or other assets than a chapter 7 liquidation would be likely to achieve. Section 362(d) of the Bankruptcy Code allows

603-449: A nondisclosure agreement, in which the airlines would discuss their financials and a possible merger." On February 14, 2013, AMR and US Airways Group officially announced that the two companies would merge to form the largest airline in the world. In the deal, which closed in the third quarter of 2013, bondholders of AMR would own 72% of the new company and US Airways shareholders would own the remaining 28%. The combined airline would carry

670-540: A nondisclosure agreement, in which the airlines would discuss their financials and a possible merger." On February 14, 2013, US Airways Group and AMR Corporation officially announced that the two companies would merge to form the largest airline in the world. The combined airline will carry the American Airlines name and branding, while US Airways' management team, including CEO Doug Parker, will retain most operational management positions. The headquarters for

737-415: A number of mechanisms to restructure its business. A debtor in possession can acquire financing and loans on favorable terms by giving new lenders first priority on the business's earnings. The court may also permit the debtor in possession to reject and cancel contracts. Debtors are also protected from other litigation against the business through the imposition of an automatic stay . While the automatic stay

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804-410: A plan during the period of exclusivity. This period allows the debtor 120 days from the date of filing for chapter 11 to propose a plan of reorganization before any other party in interest may propose a plan. If the debtor proposes a plan within the 120-day exclusivity period, a 180-day exclusivity period from the date of filing for chapter 11 is granted in order to allow the debtor to gain confirmation of

871-479: A price war against competitors — all with the bankruptcy court's approval. Studies on the impact of forestalling the creditors' rights to enforce their security reach different conclusions. Chapter 11 cases dropped by 60% from 1991 to 2003. One 2007 study found this was because businesses were turning to bankruptcy-like proceedings under state law, rather than the federal bankruptcy proceedings, including those under chapter 11. Insolvency proceedings under state law,

938-442: A reorganization; a conversion into chapter 7 liquidation, or it is dismissed. In order for a chapter 11 debtor to reorganize, they must file (and the court must confirm) a plan of reorganization. Simply put, the plan is a compromise between the major stakeholders in the case, including, but not limited to the debtor and its creditors. Most chapter 11 cases aim to confirm a plan, but that may not always be possible. Section 1121(b) of

1005-490: A row. Sustained work to reduce its supplier base has been identified as one contributing cause: in 1995, AMR obtained goods and services from 7200 suppliers, but reduced this number by 30% in 1996 and by a further 16% in 1997, achieving cost savings as a result of this consolidation. In 1998, the company announced that it would sell three of its subsidiaries and focus solely on the core airline businesses. AMR purchased Trans World Airlines (TWA) in 2001, for $ 742 million. With

1072-594: A world-class travel experience for its customers", the company said in a statement. American Airlines stated that despite the filing it was continuing normal operations. Chairman and CEO Gerard Arpey stepped down and was replaced by company president Thomas W. Horton . American was the last of the remaining legacy airlines in the US to file for bankruptcy, and thus there are no remaining legacy carriers that have not taken advantage of Chapter 11. The Air Transport Association group said that unofficial research states that AMR

1139-417: Is in place, creditors are stayed from any collection attempts or activities against the debtor in possession, and most litigation against the debtor is stayed, or put on hold, until it can be resolved in bankruptcy court, or resumed in its original venue. An example of proceedings that are not necessarily stayed automatically are family law proceedings against a spouse or parent. Further, creditors may file with

1206-484: Is most prominently used by corporate entities. In contrast, Chapter 7 governs the process of a liquidation bankruptcy, though liquidation may also occur under Chapter 11; while Chapter 13 provides a reorganization process for the majority of private individuals. When a business is unable to service its debt or pay its creditors , the business or its creditors can file with a federal bankruptcy court for protection under either Chapter 7 or Chapter 11. In Chapter 7,

1273-408: Is severable. The trustee or debtor-in-possession normally assumes a contract or lease if it is needed to operate the reorganized business or if it can be assigned or sold at a profit. The trustee or debtor-in-possession normally rejects a contract or lease to transform damage claims arising from the nonperformance of those obligations into a prepetition claim. In some situations, rejection can also limit

1340-444: Is treated as a contested matter under Bankruptcy Rule 9014. A party seeking relief from the automatic stay must also pay the filing fee required by 28 U.S.C.A. § 1930(b). In the new millennium, airlines have fallen under intense scrutiny for what many see as abusing Chapter 11 bankruptcy as a tool for escaping labor contracts, usually 30–35% of an airline's operating cost. Every major US airline has filed for Chapter 11 since 2002. In

1407-644: The American Connection brand. Chautauqua is not owned by AMR but operates aircraft for American Eagle. AMR sponsors the AMR/American Airlines Foundation, a grant-making foundation which supports charitable causes in cities served by AA, in particular the Dallas/Fort Worth Metroplex , Chicago, Illinois , Miami, Florida , Saint Louis, Missouri , and San Juan, Puerto Rico . AMR Corporation owns

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1474-474: The automatic stay of § 362. The automatic stay requires all creditors to cease collection attempts, and makes many post-petition debt collection efforts void or voidable. Under some circumstances, some creditors, or the United States Trustee , can request the court convert the case into a liquidation under chapter 7, or appoint a trustee to manage the debtor's business. The court will grant

1541-550: The AMR CEO said in March, that American is open to merger. As of September 2012, American Airlines, under chapter 11 bankruptcy protection , was looking to merge with another airline. In July of that year, in a Bankruptcy Court filing US Airways disclosed that it was an American Airlines creditor and "prospective merger partner. Then on August 31, 2012, US Airways CEO Doug Parker announced that American Airlines and US Airways had signed

1608-420: The AMR CEO stating, in March, that American was open to a merger with US Airways. US Airways told some American Airlines creditors that merging the two carriers could yield more than $ 1.5 billion a year in added revenue and cost savings. On 20 April 2012, American Airlines' three unions said they supported a proposed merger between American and US Airways. In July 2012, American announced capacity cuts due to

1675-469: The American Airlines name and branding, while the US Airways' management team, including CEO Doug Parker, would retain most operational management positions. Headquarters for the new airline was consolidated at American's current headquarters in Fort Worth, Texas . AMR president and CEO Thomas W. Horton was replaced as CEO by the current CEO of US Airways, Doug Parker . Horton remained as chairman of

1742-405: The Bankruptcy Code provides for an exclusivity period in which only the debtor may file a plan of reorganization. This period lasts 120 days after the date of the order for relief, and if the debtor does file a plan within the first 120 days, the exclusivity period is extended to 180 days after the order for relief for the debtor to seek acceptance of the plan by holders of claims and interests. If

1809-490: The Bankruptcy Code), so, only a debtor can file a plan of reorganization . The SBRA requires the U.S. Trustee appoint a "subchapter V trustee" to every Subchapter V case to supervise and control estate funds, and facilitate the development of a consensual plan. It also eliminates automatic appointment of an official committee of unsecured creditors and abolishes quarterly fees usually paid to the U.S. Trustee throughout

1876-729: The Chapter ;11 reorganization. Chapter 11, Title 11, United States Code Chapter 11 of the United States Bankruptcy Code ( Title 11 of the United States Code ) permits reorganization under the bankruptcy laws of the United States. Such reorganization, known as Chapter 11 bankruptcy , is available to every business , whether organized as a corporation , partnership or sole proprietorship , and to individuals, although it

1943-413: The acquisition, American became the largest airline in the world and surpassed United Airlines . On November 29, 2011, AMR Corporation filed for Chapter 11 reorganization bankruptcy with $ 4 billion of cash. The decision came as the airline tried to "achieve a cost and debt structure that is industry competitive and thereby assure its long-term viability and ability to continue delivering

2010-433: The advantages of a traditional Chapter 11 case without the unnecessary procedural burdens and costs. It seeks to increase the debtor's ability to negotiate a successful reorganization and retain control of the business and increase oversight and ensure a quick reorganization. A Subchapter V case contrasts from a traditional Chapter 11 in several key aspects: it is earmarked only for the "small business debtor" (as defined by

2077-581: The airline served the Ohio River valley in 1939. In 1949 the company was renamed All American Airways as it switched from airmail to passenger service; it changed its name again to Allegheny Airlines on January 1, 1953. In 1979, Allegheny changed its name to USAir , and in February 1997, to US Airways . In August 2002, US Airways Group Inc. filed for bankruptcy protection in an effort to correct its financial problems brought on by rising costs and

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2144-521: The automatic stay provisions of the Bankruptcy Code. In August 2019, the Small Business Reorganization Act of 2019 ("SBRA") added Subchapter V to Chapter 11 of the Bankruptcy Code. Subchapter V, which took effect in February 2020, is reserved exclusively for the small business debtor with the purpose of expediting bankruptcy procedure and economically resolving small business bankruptcy cases. Subchapter V retains many of

2211-441: The best interests of the creditors and the estate, the case may be dismissed resulting in a return to the status quo before bankruptcy. If the case is dismissed, creditors will look to non-bankruptcy law in order to satisfy their claims. In order to proceed to the confirmation hearing, a disclosure statement must be approved by the bankruptcy court. Once the disclosure statement is approved, the plan proponent will solicit votes from

2278-433: The business ceases operations, a trustee sells all of its assets, and then distributes the proceeds to its creditors. Any residual amount is returned to the owners of the company. In Chapter 11, in most instances the debtor remains in control of its business operations as a debtor in possession , and is subject to the oversight and jurisdiction of the court. A Chapter 11 bankruptcy will result in one of three outcomes for

2345-512: The case. Most notably, Subchapter V allows the small business owner to retain their equity in the business so long as the reorganization plan does not discriminate unfairly and is fair and equitable with respect to each class of claims or interests. The reorganization and court process may take an inordinate amount of time, limiting the chances of a successful outcome and sufficient debtor-in-possession financing may be unavailable during an economic recession. A preplanned, pre-agreed approach between

2412-471: The classes of creditors. Solicitation is the process by which creditors vote on the proposed confirmation plan. This process can be complicated if creditors fail or refuse to vote. In which case, the plan proponent might tailor his or her efforts in obtaining votes, or the plan itself. The plan may be modified before confirmation, so long as the modified plan meets all the requirements of Chapter 11. A chapter 11 case typically results in one of three outcomes:

2479-663: The completion of its merger with America West Holdings Corporation. On May 19, 2005, US Airways Group announced that it would merge with Tempe, Arizona -based America West Holdings Corporation, whose strength in the West would complement US Airways' routes in the Northeast, Europe , and the Caribbean . Prior to merging with America West Holdings Corporation , US Airways Group was based in Arlington County , Virginia . At

2546-505: The complex in 1992 for £6.3 million British pounds (US$ 9.8 million). Nina Campbell, an interior designer, had renovated the property. An AMR spokesperson said that AMR may sell the townhouse. Richard Tilton, a lawyer with specialization in bankruptcy and the director of Sheldon Good & Co., compared the property to the "corporate jets that the executives at GM and Chrysler were forced to give up", and predicted that such "symbols of corporate suite excess" were unlikely to survive

2613-442: The cost of litigating the chapter 11 case) are paid first. Secured creditors —creditors who have a security interest , or collateral , in the debtor's property—will be paid before unsecured creditors. Unsecured creditors' claims are prioritized by § 507. For instance the claims of suppliers of products or employees of a company may be paid before other unsecured creditors are paid. Each priority level must be paid in full before

2680-408: The court must determine whether the plan is "feasible, " in other words, the court must safeguard that confirming the plan will not yield to liquidation down the road. The plan must ensure that the debtor will be able to pay most administrative and priority claims (priority claims over unsecured claims ) on the effective date. Like other forms of bankruptcy, petitions filed under chapter 11 invoke

2747-442: The court seeking relief from the automatic stay. If the business is insolvent , its debts exceed its assets and the business is unable to pay debts as they come due, the bankruptcy restructuring may result in the company's owners being left with nothing; instead, the owners' rights and interests are ended and the company's creditors are left with ownership of the newly reorganized company. All creditors are entitled to be heard by

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2814-409: The court to terminate, annul, or modify the continuation of the automatic stay as may be necessary or appropriate to balance the competing interests of the debtor, its estate, creditors, and other parties in interest and grants the bankruptcy court considerable flexibility to tailor relief to the exigencies of the circumstances. Relief from the automatic stay is generally sought by motion and, if opposed,

2881-436: The court. The court is ultimately responsible for determining whether the proposed plan of reorganization complies with bankruptcy laws. One controversy that has broken out in bankruptcy courts concerns the proper amount of disclosure that the court and other parties are entitled to receive from the members of the creditor's committees that play a large role in many proceedings. Chapter 11 usually results in reorganization of

2948-406: The creditors' objection, the plan must not discriminate against that class of creditors, and the plan must be found fair and equitable to that class. Upon confirmation, the plan becomes binding and identifies the treatment of debts and operations of the business for the duration of the plan. If a plan cannot be confirmed, the court may either convert the case to a liquidation under chapter 7, or, if in

3015-427: The damages that a contract counterparty can claim against the debtor. Chapter 11 follows the same priority scheme as other bankruptcy chapters. The priority structure is defined primarily by § 507 of the Bankruptcy Code ( 11 U.S.C.   § 507 ). As a general rule, administrative expenses (the actual, necessary expenses of preserving the bankruptcy estate, including expenses such as employee wages, and

3082-602: The debtor and its creditors (sometimes called a pre-packaged bankruptcy ) may facilitate the desired result. A company undergoing Chapter 11 reorganization is effectively operating under the "protection" of the court until it emerges. An example is the airline industry in the United States; in 2006 over half the industry's seating capacity was on airlines that were in Chapter 11. These airlines were able to stop making debt payments, break their previously agreed upon labor union contracts, freeing up cash to expand routes or weather

3149-413: The debtor's business or personal assets and debts, but can also be used as a mechanism for liquidation. Debtors may "emerge" from a chapter 11 bankruptcy within a few months or within several years, depending on the size and complexity of the bankruptcy. The Bankruptcy Code accomplishes this objective through the use of a bankruptcy plan. The debtor in possession typically has the first opportunity to propose

3216-410: The debtor: reorganization, conversion to Chapter 7 bankruptcy, or dismissal. In order for a Chapter 11 debtor to reorganize, the debtor must file (and the court must confirm) a plan of reorganization. In effect, the plan is a compromise between the major stakeholders in the case, including the debtor and its creditors. Most Chapter 11 cases aim to confirm a plan, but that may not always be possible. If

3283-423: The features present in all, or most, bankruptcy proceedings in the United States. It provides additional tools for debtors as well. Most importantly, 11 U.S.C.   § 1108 empowers the trustee to operate the debtor's business. In Chapter 11, unless a separate trustee is appointed for cause, the debtor, as debtor in possession, acts as trustee of the business. Chapter 11 affords the debtor in possession

3350-530: The grounding of several aircraft associated with its bankruptcy and lack of pilots due to retirements. American's regional airline, American Eagle , stated it would retire 35 to 40 regional jets as well as its Saab turboprop fleet. As of September 2012, American's unions were looking to merge with another airline. Reports were the possible merger partners AMR was looking at were, US Airways , JetBlue , Alaska Airlines , Frontier and Virgin America . Indeed, in

3417-434: The judge approves the reorganization plan and the creditors all "agree", then the plan can be confirmed. §1129 of the Bankruptcy Code requires the bankruptcy court reach certain conclusions prior to "confirming" or "approving" the plan and making it binding on all parties in the case. Most importantly, the bankruptcy court must find the plan (a) complies with applicable law, and (b) has been proposed in good faith. Furthermore,

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3484-407: The judge approves the reorganization plan and the creditors all agree, then the plan can be confirmed. Section 1129 of the Bankruptcy Code requires the bankruptcy court reach certain conclusions prior to confirming or approving the plan and making it binding on all parties in the case, most notably that the plan complies with applicable law and was proposed in good faith. The court must also find that

3551-644: The merged business, while US Airways president Scott Kirby became president of the merged company. American Airlines operates 605 aircraft as of April 2012 with an additional 451 on order. The new planes will consist of 260 A320neo from Airbus and 200 Boeing 737s over the next five years. It will also take options and purchase rights for up to 465 additional planes through 2025. American Eagle Airlines , AMR's regional subsidiary operates 284 aircraft including 39 which are operated by Executive Airlines , another subsidiary of AMR Corporation. Fifteen aircraft are operated by Chautauqua Airlines under

3618-554: The new airline will also be consolidated at American's current headquarters in Fort Worth, Texas . See US Airways destinations for destinations served by US Airways Group's four airline subsidiaries, along with the independent US Airways Express carriers. US Airways Group holds a (10%) investment in Mesa Air Group AMR Corporation AMR Corporation was an airline holding company based in Fort Worth , Texas , which

3685-404: The next lower priority level may receive payment. Section 1110 ( 11 U.S.C.   § 1110 ) generally provides a secured party with an interest in an aircraft the ability to take possession of the equipment within 60 days after a bankruptcy filing unless the airline cures all defaults. More specifically, the right of the lender to take possession of the secured equipment is not hampered by

3752-545: The post-Sept. 11 drop-off in air travel. On September 12, 2004, US Airways Group and most of its subsidiaries filed for bankruptcy protection for the second time in three years. US Airways Group and the aforementioned subsidiaries, including US Airways, emerged from Chapter 11 bankruptcy protection with the help $ 125 million equity investment from Air Wisconsin 's parent company Air Wisconsin Airlines Corporation [1] on September 27, 2005, in connection with

3819-421: The proposed plan. With some exceptions, the plan may be proposed by any party in interest. Interested creditors then vote for a plan. If the judge approves the reorganization plan and the creditors all agree, then the plan can be confirmed. If at least one class of creditors objects and votes against the plan, it may nonetheless be confirmed if the requirements of cramdown are met. In order to be confirmed over

3886-545: The reorganization plan is feasible in that, unless the plan provides otherwise, the plan is not likely to be followed by further reorganization or liquidation. In a Chapter 11 bankruptcy, the debtor corporation is typically recapitalized so that it emerges from bankruptcy with more equity and less debt, a process through which some of the debtor corporation's debts may be discharged. Determinations as to which debts are discharged, and how equity and other entitlements are distributed to various groups of investors, are often based on

3953-585: The space of 2 years (2002–2004) US Airways filed for bankruptcy twice leaving the AFL–CIO , pilot unions and other airline employees claiming the rules of Chapter 11 have helped turn the United States into a corporatocracy . The trustee or debtor-in-possession is given the right, under § 365 of the Bankruptcy Code, subject to court approval, to assume or reject executory contracts and unexpired leases. The trustee or debtor-in-possession must assume or reject an executory contract in its entirety, unless some portion of it

4020-491: The study stated, are currently faster, less expensive, and more private, with some states not even requiring court filings. However, a 2005 study claimed the drop may have been due to an increase in the incorrect classification of many bankruptcies as "consumer cases" rather than "business cases". Cases involving more than US$ 50 million in assets are almost always handled in federal bankruptcy court, and not in bankruptcy-like state proceeding. The largest bankruptcy in history

4087-463: The time of announcement, plans called for the new entity to retain the US Airways brand, its Dividend Miles frequent flyer program , and participation in the Star Alliance (subject to the approval of partner United Airlines); however, it would be headquartered at America West's corporate offices and America West executives and board members would be in control of the merged company. The merger

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4154-498: Was completed on September 27, 2005. In October 2006, US Airways leased new office space in a building across the street from its corporate headquarters in Tempe, Arizona to expand and centralize its Corporate operations. On November 15, 2006, US Airways Group announced a proposal to purchase Delta Air Lines for $ 8.0 billion, half of this amount to be paid in cash with the remainder to be paid in stock . US Airways Group had obtained

4221-400: Was of the US investment bank Lehman Brothers Holdings Inc., which listed $ 639 billion in assets as of its Chapter 11 filing in 2008. The 16 largest corporate bankruptcies as of December 13, 2011 Enron, Lehman Brothers, MF Global and Refco have all ceased operations while others were acquired by other buyers or emerged as a new company with a similar name. ‡ The Enron assets were taken from

4288-545: Was projected to cut 20 percent—$ 2 billion—of operating costs and raise revenue by $ 1 billion. Since 2001, accumulative losses of the company were $ 11 billion. On February 1, 2012, Horton announced that they would be cutting 13,000 jobs and restructuring pension benefits, after losing $ 884 million in the first nine months of 2011 and $ 904 million in December 2011 alone. In January 2012, US Airways Group expressed interest to take over American Airlines, followed by

4355-551: Was the 100th airline company to go into bankruptcy protection since 1990. On December 2, 2011, AMR Corporation was replaced by Alaska Air Group in the Dow Jones Transportation Average . In February 2012 the company announced that in order to cut operating costs and boost revenue, it would eliminate 13,000 jobs, which amounted to 18 percent (including 15 percent management positions) of American Airline's 73,800 employees. This

4422-537: Was the parent company of American Airlines , American Eagle Airlines , AmericanConnection and Executive Airlines . AMR filed for Chapter 11 bankruptcy protection in November 2011. The company emerged from bankruptcy on December 9, 2013, and at the same time announced that it would merge with US Airways Group to form a new company, American Airlines Group . AMR Corporation was formed in 1982, as part of American Airlines ' non-bankruptcy reorganization into

4489-851: Was up to Delta Air Lines creditors as well as a bankruptcy judge as to what would happen. Delta employees, represented by the Delta Board Council and the Air Line Pilots Association , organized against what they termed the "hostile takeover" effort by US Airways under the title "Keep Delta My Delta". A rally against the US Airways merger at the Georgia International Convention Center was held December 13, 2006, and attended by nearly 3000 pilots, family members, and other supporters. On January 10, 2007, US Airways upped their bid for Delta from $ 8.5 billion to $ 10.2 billion, and imposed

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