What American Airlines’ Bankruptcy Means For You

Nov 29, 2011 1:35pm

gty american airlines counter nt 111129 wblog What American Airlines Bankruptcy Means For You

American Airlines filed for Chapter 11 bankruptcy today. The filing, which took many investors by surprise, has caused worry among American Airlines customers who fear that their miles and tickets may not be honored. Here’s a look at the answers to some of the questions American Airline’s customers are asking.

Will my tickets be honored? “American Airlines’ ticket holders are safe,” according to Rick Seaney, the CEO of FareCompare, a company which specializes in helping air travelers get the best deals on flights. “It’s no problem, historically we’ve seen all the major airlines go bankrupt except American and it’s never been an issue with honoring tickets.”

What about frequent flier miles? “Your miles are safe as well,”  Seaney confirms. In fact “we may see American offering double or even triple miles” as they seek to mitigate the public relations damage associated with the bankruptcy, he said. Frequent fliers are the airline’s core customers, according to George Hamlin, an aerospace aviation consultant who has worked with TWA and Texas International, failing to honor their miles is a sure recipe for failure.

What about the workers? American Airlines has 78,250 employees and they will not do well in this bankruptcy, according to aviation analyst Darryl Jenkins. In addition to layoffs, “They are all going to face benefit cuts.  This will not be fun. If you’re an American employee you will take a pretty big hit.”

Will the cutbacks affect safety? Unlikely, says  Jenkins. “Generally what you see in a Chapter 11, is FAA steps up oversight.  We’ve really never seen a US bankruptcy lead to safety compromises.”   Seaney added,  ”Safety is the number one concern of airlines…the worst thing that could happen is a safety violation.”

So what does this mean in long run? “Nothing likely for at least three to six months,” according to Jenkins. Because most of the airlines have already cut back on routes in the last few years, further cutbacks will be few and far between. However, if cutbacks do occur the 35-50 seat regional jets, which tend to be the most unprofitable, are likely to be the first to go.

Jenkins said the brunt of the bankruptcy will be borne by the stockholders, bond holders, and employees. Travelers will be largely unaffected, although Seaney does advise spring break travelers to wait until after New Years to start looking at tickets.

ABC News’ Lisa Stark contributed to this report.

 

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