American Airlines is the Subject of Widespread Bankruptcy Speculation in the Press

Reuters is reporting that shares of American Airlines parent AMR Corp fell as much as 41 percent today.  They attribute the fall to growing fears that the airline may be headed for bankruptcy.

The Orlando Sentinel article explains that the carrier has said Chapter 11 is “not our goal.”  Bloomberg News reports:

A Chapter 11 filing “is certainly not our goal or our preference,” said Andy Backover, an American spokesman. “We know we need to improve our results, and we have a sense of urgency as we work to achieve that.”

Shares of AMR Corp had closed at $2.96 yesterday.  They had tumbled down to $1.98 by today’s closing bell (and the day’s low was $1.75).

The fear for distributors should be that if American files for bankruptcy, distributors may find it difficult to get paid for any pre-filing extension of credit.  ASA has published a number of articles about protecting your business from customer bankruptcy in the past.  Here are two past articles (please note that they are older articles and any customer-bankruptcy-anticipation strategy should be discussed with an attorney before implementation):

• Bankruptcy Tips
• Bankruptcy 101

Although we have no recommendation to make about whether to do business with any particular customer, there are certainly strategies that a distributor can implement in order to improve their chances of getting paid what they are owed.