AMR Edges Toward the Abyss

Updated from 12:10 p.m. EDT

In order to avoid filing for bankruptcy, American Airlines will need to repair its broken relationship with employees. But in the end, even if that happens, experts say its ability to avoid a Chapter 11 filing is far from guaranteed, and may even be a long shot.

AMR (AMR)-unit American Airline's current plan to avoid bankruptcy involves getting deep cost cuts from employees. But in its five-paragraph earnings release from late Wednesday morning, you will not be able to find any mention of the labor dispute that could drive the company into Chapter 11.

Nothing was said about the only issue that really matters at this point: whether unions representing the company's flight attendants, pilots and mechanics will ratify the $1.6 billion in annual cost cuts that all three voted to accept last week. But American has gone silent as it negotiates with unions, canceling Wednesday's planned conference call to discuss earnings, and ostensibly, the fate of the company.

"We waiting to learn what the unions are going to do and with all of the other issues that have surfaced this week, we're certainly not in a position to hold a conference call this afternoon," said Al Becker, company spokesperson, who added that the call had not been rescheduled. "The board met electronically today and finished their meeting."

So while AMR investors got a good look on Wednesday at the company's first quarter, they received zero new information about how the dispute between labor and management will proceed in the next few days. According to union officials, corporate management and union leadership are ensconced in a Texas boardroom, discussing Don Carty's recent missteps and what the company's board of directors actually knew.

Unions are upset that after spending weeks in heated negotiations to cut their own pay by as much as 25%, management came out on March 31, after the vote was ratified, and revealed a plan to give executives bonuses and protect their pension under the event of a bankruptcy filing. But whether the board knew that Carty was going to file its 10-K with the SEC after concessions were already agreed upon is emerging as a pivotal issue.