Thursday, June 30, 2022 Jun 30, 2022
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Business

American Airlines on Bankruptcy: We Need Fewer Workers, More Consultants

By Jason Heid |

Bankruptcy is complicated, no doubt. But when American Airlines’ parent company sought to hire four additional law firms (in addition to its lead bankruptcy counsel) and eight consulting firms to advise it on how to navigate through the Chapter 11 process, the United States Trustee overseeing the bankruptcy objected. There’s a court hearing on the matter set for Friday.

As Bloomberg notes, Tracy Hope Davis stated that “The scope of services set forth in each application is so broad that the potential for duplication with the other firms is apparent.”

I am continually astonished by the corporate consulting industry, the way that a company will insist its CEO and other top executives are worth lavishing millions of dollars upon but is just as quick to feel it must hire an outside firm for “strategic” advice that apparently none of its C-suite stars could come up with themselves. My guess is that there’s a CYA motivation to much of it.

On the other hand,  bankruptcy is not part of a company’s normal operations, and it shouldn’t be surprising that AMR could use help. This is how much help they requested:

Law Firms

  • Weil Gotshal & Manges – Bankruptcy counsel
  • Debevoise & Plimpton – Special aircraft counsel on “aircraft financing and lease arrangements”
  • Groom Law Group – Special employee benefits counsel
  • Paul Hastings – Special labor counsel for “objecting to and litigating potential bankruptcy claims by employees and/or unions,” among other matters
  • Morgan Lewis – Special labor and employment counsel for collective bargaining negotiations



Consultants

  • Bain & Company – Strategic consultants to American Eagle “to provide labor cost assessment and labor solutions and negotiations support.”
  • Deloitte – Consultants for “bankruptcy consulting functions”
  • Ernst & Young – Auditor and tax advisor
  • KPMG – Tax compliance and tax consultants
  • McKinsey & Company – Management consultants to, “among other things, provide business plan support services.”
  • Perella Weinberg Partners – Financial advisor on labor-related services (like how to get out from under labor agreements and pension obligations)
  • Rothschild Group – Financial advisor and investment banker
  • Skyworks – Aircraft restructuring advisor (dealing with their aircraft lease and financing obligations)



Keep in mind that those are in addition to 51 firms they’ve applied to be able to continue work with to “Handle Tax and Other Matters” and 167 law firms they work with in the “Ordinary Course of Business.”

Meanwhile American Airlines CEO Tom Horton sent a letter to employees yesterday that implied layoffs will be coming:

“Since we will be refining the organization and getting leaner, we will obviously end the process with fewer people,” Horton said in the letter, although he offered few details on what changes have been or will be made.

I should have headlined this post “Why I Was Never Interested in Business School or Law School.”