AMR Risks Cash Erosion

Problems such as delays and loose seats could force airline to tap bankruptcy cash fund.

American Airlines risks having to tap its $5 billion bankruptcy cash fund and probably will lose some passengers after on-time arrivals tumbled, cancellations surged and incorrectly installed seat clamps were found on six planes.

The operational obstacles add to questions about whether American, the third-biggest U.S. airline, can successfully emerge from bankruptcy protection on its own or should merge with would-be suitor US Airways Group Inc., said James Corridore, a Standard & Poor’s equity analyst in New York.

Passenger Loyalty

American returned the 757s to service on Oct. 3, then said yesterday it might delay or cancel some flights while mechanics performed additional inspections on the four dozen jets when they landed at their next destinations.

Public Reaction

“It costs money when the system is not on time,” Kauffman said. “Whether it’s reshuffling aircraft to different locations or getting new crews or paying for passenger inconvenience, there are a lot of small costs. The biggest one is when the flying public says, ‘Enough is enough.’”

US Airways

While US Airways already has reached contract agreements with American’s unions conditioned on a merger, American has said it prefers to emerge from court protection on its own and then consider combinations.

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