American Airlines’ parent filed for Chapter 11 bankruptcy protection this morning.
In the past decade, United, Delta, and US Airways have all been in and exited from bankruptcy protection.
American will certainly continue to operate through its reorganization, which is designed to shed costs that competitor airlines have already offloaded. While there will be some operational changes no doubt, frequent flyers need not worry.
As I explained last month, an American Airlines bankruptcy is not bad for frequent flyers.
I have nearly a million American Airlines miles myself, and lifetime Platinum status with the airline. And I’m not worried about my stash of miles. American Airlines will continue to fly, liquidation is not foreseeable.
Bankruptcy may even be a boon to American’s mileage program. It’s been quite some time since American Airlines restructured their frequent flyer award redemption chart, while other carriers have adjusted their award pricing upwards. A bankruptcy could well put off any award chart inflation, not wanting to anger or spook customers during the process, and lead the carrier to attempt to leverage the program during bankruptcy through lucrative bonus offers and promotions, much to the benefit of members (although likely leading to greater award chart inflation after American exits bankruptcy).
Update: I’m quoted by the Associated Press this morning:
“Miles are safe,” said Gary Leff, co-founder of frequent flier site MilePoint. He said the bankruptcies of past airlines “are instructive.” He even suggested there might be some promotions to keep loyal travelers.
Should not have bought that stock…
There will likely be some booking pullback from this, which AA will try to counteract with lucrative promotions, maybe even a DEQM promo. Best case for all of us is if the other carriers, especially UA/CO, are forced to match.
I am hoping for that JetAway. I don’t much care about other airlines matching, but this should help AA offer some more reasonable fares than they have been of late.
Right on the day I’m planning to get a couple of their CCs…
Imagine how much money they’d be out if they painted their planes …
Let them die, let some new fresh blood come into the industry.
This one caught me off guard, (thank the flying angels I didn’t buy the stock). This airline was being hailed as the only functional operating airline just a couple years ago with the currency (stock and cash) to do acquisitions and drive business. Now, just a little under two years later – BOOM! What went so wrong so fast to take them down.
I bought the stock … glad I did. Will hold it for a few months/years and see what happens.
@jcmitchell21
Your glad you bought the stock? They are in bankruptcy, their stock will go to zero.
Gary,
Do you have any clue how long AA might remain in BK? I’ve got a nice stash of miles with them, but don’t plan on using them until late 2013. Do you think they’ll still be in BK a year from now, at which point the schedules will be loaded for the trips we would consider taking?
@Dan I don’t yet know their plan and even if I did there’s no guarantee they’ll stick to it, I have to believe they’ll still be in Chapter 11 twelve months from now.
@Gary @Dan As per Reuters, 18 months is what AA is targeting for the complete process.
@planesimple I understand I just don’t know that they even know at this point, so I’m a bit dismissive of 18 months, could be longer, though certainly at least a year
I don’t totally agree that AA won’t devalue their chart. Maybe not short short term, but next year I can see them easily adding fuel surcharges to keep up with “the industry trends” and to make their scheme more profitable.
This is a great time to burn miles, with the BA devaluation, UA and AA are almost certain to devalue in lock step within the next year, or at least pull a delta and make their “saver” awards more difficult to find.
I am also speculating that we may see an added push to “sell” more miles through CC bonuses or other methods of delivery. Since Loyalty programs have become the epicenter of Airline Revenue and the purpose of this bankruptcy is to focus the airline on its most efficient products it would make sense.
The 2nd part is cutting costs. The reason they had to file for bankruptcy is because they needed to cut labor costs and could not. This will allow them to make this sweeping reforms and they will try to minimize blow back on the consumers which could be another reason why they would offer more mileage bonuses in the subsequent months.
@Travel Abstract to be clear this isn’t JUST about cutting costs. American needs to cut costs to be sure. But they also have revenue problems. They’ve got some bad routes eg the ORD transatlantics.
I wonder if that big One World Mega-Thing where everyone is getting promos and free FF Miles without earning them will have the rug pulled under you. LOL.
The only real concern for AA frequent flyers here is that the airline will likely look a little different 2 years from now than it does today. But I think the changes are more likely to be good than bad. I don’t see them abandoning any of their hubs, although there will certainly be some changes in store.
Most interesting is whether this bankruptcy will lead to a merger with US Airways. The odds of this have to be about 50% now. Again, though, I don’t know why this would be bad for American’s customers.
@ED the Oneworld MegaDO is unaffected.
So….I wa planning on getting an AA credit card….should I, or should I go with a different airline? I have a ton a AA FF already, so that is why I was going to go with their CC.
@SHH nothing to worry about IMHO