AMR’s (AMR) bankruptcy filing today could have a ripple effect on the airline industry. Big airlines are generally trading higher this morning, probably on the likelihood that the AMR bankruptcy will eventually strip capacity from the system, allowing them to charge higher prices. US Airways (LCC) and Jet Blue (JBLU), for instance, are both up 8.7%.
But other companies might get hurt. Republic Airways (RJET), for instance, has a contract with AMR to fly 113 flights per day for the company, and that contract might have to be renegotiated. Republic was down 2.5%.
“With AMR Corp. filing for Chapter 11 Republic’s contract will likely be renegotiated,” wrote Dahlman Rose analyst Helane Becker. “The contract with AMR Corp. as it stands now is expected to go through February 1, 2013; however, AMR may terminate the code- share agreement without cause upon 180 days notice. If AMR terminates the code-share agreement without cause, Republic has the right to put the leases of the aircraft or to sell the aircraft to AMR.”
Boeing (BA) and Airbus, which recently agreed to supply AMR with 460 new planes for $38 billion, could also be affected, although an AMR spokesperson told the New York Times that “it is our intent” to keep those deals intact. The market apparently assumes the deals will hold up: Boeing is 0.9% higher today.
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