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American Airlines Files for Bankruptcy

REUTERS |  American Airlines and its parent company AMR Corp filed for bankruptcy on Tuesday to cut costs and combat soaring fuel prices and dampened travel demand.

American Airlines was once the largest U.S. carrier, but is now third behind United Airlines and Delta Air Lines. It had been the only major U.S. airline to avoid a bankruptcy filing in the last decade and consequently has the industry's highest labor costs.

The airline hopes bankruptcy will cut labor costs after it failed to reach a deal with pilots and other work groups after years of fruitless negotiations. Analysts question, however, whether restructuring under Chapter 11 of U.S. Bankruptcy Code will address operational shortcomings and bolster revenue.

The filing also leaves AMR vulnerable to unsolicited takeover bids by rival airlines in the rapidly shrinking airline industry.

"It completes the cycle," said Helane Becker, an analyst with Dahlman Rose & Co. "Every major airline in the united States has filed for Chapter 11."

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