This article from NYTimes.com has been sent to you by psa188@xxxxxxxxx American Airlines Is Called Close to Seeking Bankruptcy March 28, 2003 By EDWARD WONG and RIVA D. ATLAS American Airlines, its business suffering as war fears ground travelers, may seek bankruptcy protection as early as next week, according to two bankers who have been briefed on the carrier's efforts to line up financing ahead of a filing. Executives at the airline, the world's largest, worry that labor cost cuts under discussion with unions may not be enough to return the carrier to profitability, one of the bankers said yesterday. Tara Baten, a spokeswoman for American, said that the airline, a unit of AMR, still hoped to avoid a Chapter 11 filing. "There's been rampant speculation on this for many weeks, and the fact is that our commitment, our plan and our focus is to do everything possible to avoid bankruptcy," she said. "We continue to have face-to-face negotiations working around the clock, and we remain hopeful that we can restructure the company consensually with our labor groups, rather than in the courts." A bankruptcy filing by American would almost certainly be the largest in aviation history, and it would follow closely on the heels of filings last year by the No. 2 airline, United, and by US Airways, the No. 6 domestic carrier. Those airlines' schedules, frequent-flier programs and other operations were not immediately affected by their retreats into bankruptcy protection, and experts said travelers could expect the same if American filed. But US Airways eventually cut back on flights and began using smaller jets on some routes, and United is now doing the same. According to the bankers, American is looking to put together more than $1.5 billion in debtor-in-possession financing, which would allow it to maintain its operations. The potential lenders, the bankers said, are Citibank, a unit of Citigroup; J. P. Morgan Chase; and the CIT Group. Citibank, which issues a credit card tied to American's frequent-flier program, would be the lead lender. One banker said that the package could be assembled over the weekend. The other said that even if American did not reach an agreement with the lenders by next week, the airline could still file for bankruptcy protection and complete the financing shortly afterward. If its financial situation looked bleak enough, American would want to file for bankruptcy protection as soon as possible to preserve its cash. "People are being asked by AMR to work as quickly as possible," this banker said. "People are still in analysis mode. People weren't working on a time line for next week. They were working for a little bit beyond that." Previously, he said, bankers had expected that American would not file before late in the spring. Passenger traffic has declined sharply for all airlines since the United States invaded Iraq last week. American has announced plans to cut 6 percent of its seats, all from international routes; even before the war began, it had planned to cut its capacity by 7 percent in April, from domestic flights. Last week, Hawaiian Airlines, the nation's No. 12 carrier, sought court protection, even after it had negotiated $15 million in annual contract concessions from its unions. Shares of AMR closed at $1.79 yesterday, down 18 percent. The stock was over $26 a year ago. Early last month, American said it was asking its workers for $1.8 billion in annual wage, benefit and work rule concessions, aiming to cut a total of $4 billion from expenses every year. It has requested $660 million from the Allied Pilots Association, whose negotiators are expected to present a cost-cutting package equaling that amount to union leaders by the weekend. The leaders will probably vote on the cuts before Tuesday. Gregg Overman, a union spokesman, said yesterday that the union presumed that American's accelerated search for bankruptcy financing was "part of the airline's contingency planning." On Wednesday, the union said American was engaging in "bad-faith negotiations" by saying it might have to lay off 1,000 pilots. The union argued that American had agreed not to seek cost savings beyond the $660 million. American said the layoffs were part of cuts that had already been announced. Both sides stuck to their positions yesterday. "We're saying we have kept our word, and we're not changing what we're asking of our employees," said Ms. Baten, the American spokeswoman. Mr. Overman said that the layoff threat "seems nonsensical." The $660 million cost-savings package will include job cuts, he said, as pilots are required to work more hours. Still, Mr. Overman added, negotiators were meeting with company officials in Texas until late into the night. "We agreed that they have a situation that needs to be addressed," he said. Yesterday, American said that it had reached a tentative agreement for concessions from its 16,300 fleet service workers. The workers are one of eight groups represented by the Transport Workers Union, one of the three big unions at American. Both the airline and the union declined to give details of the tentative agreement. United, a unit of UAL, reached a tentative agreement with the Air Line Pilots Association yesterday over wage and benefit cuts, and that could put pressure on the pilots' union at American to accept deeper reductions, one banker said. US Airways, meanwhile, is expected to emerged from bankruptcy protection on Monday. One bankruptcy lawyer in Fort Worth, where American is based, said that the airline might file in its hometown because it would probably get a favorable reception in the bankruptcy court there. But the lawyer noted that Weil, Gotshal & Manges, the law firm that American asked in January to look into a bankruptcy filing, is based in New York, so the airline might file there. If so, American's would be one of several huge recent bankruptcy filings in that court, including those of Enron and WorldCom. http://www.nytimes.com/2003/03/28/business/28AIR.html?ex=1049861392&ei=1&en=4a05819f7a44fd89 HOW TO ADVERTISE --------------------------------- For information on advertising in e-mail newsletters or other creative advertising opportunities with The New York Times on the Web, please contact onlinesales@xxxxxxxxxxx or visit our online media kit at http://www.nytimes.com/adinfo For general information about NYTimes.com, write to help@xxxxxxxxxxxx Copyright 2003 The New York Times Company