AMR to clean the balance sheet

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05 December 2011

As AMR Holdings, parent company of American Airlines, enters bankruptcy, financiers and lessors will have to offer better terms depending on their leverage.

During the United bankruptcy last decade, the airline told financiers that it would be halving its 757 fleet. Those who offered the best terms kept their jets in the air.

Only one week into its 60-day Section 1110 bankruptcy protection AMR Holdings will look to restructure all parts of the business including financing terms and lease rates.

The company has already written to lenders and lessors that it will be returning some equipment. Given the relatively geriatric average age of the airlines mainstay equipment – 15 years – it is likely that the company will press lessors on lease rates and financiers for better financing terms, with the threat of rejecting aircraft outright.

Already in 2005, American Airlines restructured leases and funding terms without filing for bankruptcy. As the company begins to negotiate with stakeholders to restructure its balance sheet, financiers are likely to have to share the burden, softening lease rates...

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