DALLAS TheStreet) -- Eight and a half years after it narrowly averted a bankruptcy filing, choosing instead to honor commitments and maintain defined benefit pensions, American Airlines and parent AMR ( AMR) have changed course and filed for Chapter 11 protection Tuesday. Additionally, CEO Gerard Arpey, a career AMR employee with
the rare perspective that bankruptcy lacks morality, has retired after 30 years with the company.
American came close to bankruptcy in the spring of 2003, but turned aside at the last minute due to deals with unions and Arpey's aversion. Since then, the carrier has struggled, losing more than $8 billion. In the third quarter, it was the only major carrier
to lose money. American has said its annual labor costs are $800 million higher than competitors' costs, and the Association of Professional Flight Attendants has disputed the number. But it is clear that a combination of higher cost and unsuccessful strategy doomed the carrier, which had been the world's largest. Competitors Delta ( DAL) and United ( UAL) both filed bankruptcy and then pursued mergers with carriers who had also cut costs in bankruptcy. Armando Codina, AMR's lead independent director, said the board asked Arpey to remain. But "we understand and respect his decision to retire and entrust the company he loves to a new leader for a new time," Codina said, in a prepared statement released Tuesday. "For 30 years Gerard Arpey has given his all to this company, especially during the last decade," he added. "Gerard is a person of exceptional integrity, intelligence and commitment, and he helped our company to achieve amazing things against sometimes staggering odds." Tom Horton, the new CEO, also applauded Arpey, a friend who urged him to return to American in 2006 after he left to work for four years at AT&T ( T). "This is a difficult business in the best of times, and I cannot think of anyone I would rather have worked with or had as a friend for over two decades than Gerard Arpey," Horton said, in a prepared statement. "He is not only a great business leader; he is also a man of honor.
"With characteristic selflessness, he decided it was time for a new leader to take the company forward," Horton continued. Arpey, meanwhile, said in a statement that "the process launched today will no doubt require far-ranging and sometimes difficult change, but it represents an opportunity to rebuild American in a way that assures its ability to compete in a changed world. "I appreciate the board's confidence in me, but I also believe that executing on this plan requires a new leader for a new time," Arpey said. In a 2010 interview with TheStreet , Arpey's commitment to principle and aversion to bankruptcy were clear. "This company stands for something, more than just any old company," he declared. "Gradually, it will emerge as a successful company that honored its commitments and its pension obligations and that was guided by principles of doing what's right. "The path we have taken has created cost challenges for us," Arpey acknowledged. "But I believe there is something misguided about how we measure success, if success is bankruptcy, giving pension obligations to taxpayers and not paying back creditors. By that measure, we have failed." -- Written by Ted Reed in Charlotte, N.C. >To contact the writer of this article, click here:
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