Bloomberg News

AMR Bankruptcy Deals ‘Blow’ to Texas Region That Lured Airline

December 06, 2011

(For more on the AMR bankruptcy, see EXT2 <GO>)

Nov. 30 (Bloomberg) -- The bankruptcy of American Airlines parent AMR Corp. deals a blow to the Dallas-Fort Worth region of Texas, a community whose identity and fortunes have been tied to the company and aviation for more than 80 years.

American Airlines is the second-biggest employer in the region, with more than 20,000 of its 80,000 workers based there, and has had a presence in Dallas-Fort Worth since 1929. About one in six jobs in the region is related to transportation, trade or airlines, including American and Dallas-based Southwest Airlines Co., according to the North Texas Commission.

“It’s very, very disappointing and sad,” said Ray Hutchison, a lawyer in Dallas with Vinson & Elkins LLP who is the husband of U.S. Senator Kay Bailey Hutchison and worked with politicians to lure AMR’s headquarters to Fort Worth in 1979 from New York.

“They’ll come out of it OK,” he said. “They’ve got to get their labor relations right and the fuel cost right.”

AMR, once the world’s largest airline, filed for Chapter 11 protection from creditors yesterday, listing $24.7 billion in assets and $29.6 billion in debt. While American and American Eagle airlines continue to fly regular schedules, AMR said it may eliminate jobs and trim service to some cities. AMR has said it wants to renegotiate contracts with labor unions.

“We’ll probably see some cuts in wages and benefits for local workers and that’ll ripple through the economy,” said Bernard Weinstein, an economist at Southern Methodist University’s Cox School of Business in Dallas.

‘Block By Block’

Employees also may lose about $1 billion in retirement benefits, Josh Gotbaum, director of the U.S. government’s Pension Benefit Guaranty Corp., said yesterday in a statement.

Dallas Mayor Mike Rawlings said the bankruptcy will be felt “block by block.”

“I live next door to a pilot and a flight attendant,” he said in an interview. The bankruptcy “impacts their lives, I care about that, so it’s more a personal thing as opposed to a macro-economic level.”

The pension agency, which insures private-sector retirement plans, is encouraging AMR to “fix its financial problems.”

AMR fell behind as peers including Delta Air Lines Inc., Northwest Airlines Corp. and UAL Corp.’s United Airlines used the bankruptcy courts to shed costly pension and retiree benefit plans and restructure debt. American later watched some competitors combine, giving them larger more lucrative routes.

The airline may be stronger after the bankruptcy if it can lower its fuel and labor costs, said Mabrie Jackson, president of the North Texas Commission, which coordinates the efforts of local governments for common municipal projects.

Regional Coup

“It makes everybody nervous,” Fort Worth Mayor Betsy Price said in an interview. “The other airlines that have been through bankruptcy have all emerged stronger and more efficient. We feel certain American will also.”

American was created in 1929 by combining smaller airlines, including Dallas-based Texas Air Transport. American’s southern division was later based in Fort Worth, and the company’s 1933 Art Moderne hangar at Meacham Field is on the National Register of Historic Places.

AMR moved its headquarters to Fort Worth from New York in 1979, according to its website. Other corporate relocations, including Exxon Mobil Corp. and J.C. Penney Co. helped make Dallas-Fort Worth the fourth-biggest U.S. metropolitan area.

“That was a real coup for the area,” Weinstein said. “It helped put D-FW on the map.”

“In a sense that was American coming home.”

Allan Saxe, a professor of political science at the University of Texas at Arlington, agreed.

“American has been so much a part of who we are,” Saxe said in an interview. The bankruptcy is “more of a psychological blow, I think, than anything else.”

--With assistance from Mary Schlangenstein in Dallas, David McLaughlin in New York, Phil Milford in Wilmington, Delaware and Jim Snyder in Washington. Editors: Romaine Bostick, Kevin Miller

To contact the reporter on this story: Mike Lee in Dallas at mlee326@bloomberg.net

To contact the editor responsible for this story: Susan Warren at susanwarren@bloomberg.net


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