American Airlines' parent company AMR Corporation has filed for Chapter 11 bankruptcy protection.
Chapter 11 protects a company from its creditors, giving it time to reorganise its debts or sell parts of the business.
AMR said agreements with its workforce forced it to spend $600m (£384m) more than other airlines on staff costs.The airline employs 78,000 staff worldwide and operates out of five major US hubs - New York, Los Angeles, Dallas, Chicago and Miami.
AMR Corporation lost $162m in the third quarter of 2011 and has reported losses in 14 of the last 16 quarters.
AMR expects the airline to continue to operate as normal throughout the bankruptcy process.
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