American Airline Stock Drops Leading to Bankruptcy Speculations

Stock prices for American Airlines slipped today after the company failed to make progress in negotiations with pilot unions. According to Fitch Ratings, the long deadlock with pilot’s labor contracts could put American Airlines into Chapter 11 bankruptcy; recommended by bankruptcy lawyers if a company has assets that can be liquidated.

The airlines stock slipped 10 percent on Tuesday, when they were unable to draw up a new labor contract with pilots. This labor dispute has been in stalemate for years. But a union spokesman said that a new contract could be voted on sometime this week.

Their peers Delta Air Lines and United Air Lines had to restructure under Chapter 11, which allowed them to lower their labor costs.

Without court protection, prescribed by a bankruptcy attorney, some companies may not survive amid rising labor and operating costs.

ARM Corp., American’s parent company has stated that they would prefer to cut its costs and reach an agreement with labor unions instead of file for court protection.

The airline industry like so many others have been struggling since the country fell into a recession. Unforeseen circumstances and rising costs have caused numerous businesses financial troubles.

There are times that a company must take drastic measures in order to continue operations. In many cases, that drastic measure is bankruptcy. By meeting with a bankruptcy attorney, the struggling business can see what options they have to stay solvent.