American's Bankruptcy Won't Hurt Flyers - For Now

November 30, 2011

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American Airlines passengers should not expect any near-term changes after the airline filed for bankruptcy, but the filing may affect their future plans.

Holiday flights should take off as scheduled, and the carrier says it will honour existing reservations and reward miles. "I think everything's cool," said Tom Parsons of Bestfares, a long-time observer of the airline industry.

But the Chapter 11 reorganisation of American Airlines and its parent company AMR could lead to a shakeup in prices, fewer flights and an altered flying experience.

Here are the answers to some key questions:


For now: "I have almost 300,000 miles with American, and there's no sweat on my brow," said Parsons. Airlines tend to protect their mileage programmes throughout bankruptcy, he said, because they make money selling miles to credit card issuers, and even passengers trading in miles fill seats and spend money.

American sent a letter on Tuesday to its frequent flyers saying, "We want to assure you that your AAdvantage miles are secure," and noting its intent to honour existing awards.

But Morningstar airline analyst Basili Alukos said that could change. "My hunch is that, when they come out of bankruptcy, they may make them more difficult to redeem," he said. "From what I understand, they can change this whenever they want."


Booked flights are secure, as American said it would operate its current schedule and honour tickets and reservations. But American could reduce its number of flights. That could mean that not all routes would continue indefinitely.


American may cut prices to keep planes full and nervous passengers buying tickets for a slow January and February, but those are typical sale periods for the airlines.

"As always we will remain competitive with fares in the marketplace," said Tim Smith, an American spokesman. Parsons said he expects American to price aggressively over the winter, perhaps adding extra miles rewards and the like, to keep up customer confidence.

But the longer-term impact of an airline bankruptcy is higher ticket prices, not lower. As American uses this reorganisation to get rid of many big, pricey, old planes, it may cut routes. "With fewer planes in the sky and fewer seats, you may be forced to pay more," said Parsons.

Once American emerges from bankruptcy, it will be less likely to price aggressively, said Morningstar's Alukos. "Future ticket prices should be higher."


Federal safety inspectors have stepped up their surveillance of American Airlines and American Eagle (also owned by AMR), according to the Federal Aviation Administration. "The FAA acts swiftly to aggressively protect the safety of the travelling public any time an airline files for bankruptcy protection," said a spokesperson for the agency.

But that's a typical precaution, and there's no reason to believe that the bankruptcy filing of such a large airline would lead to safety problems. "I haven't seen any connection, not even a hint" that financial problems cause airline accidents, said Harro Ranter, president of the Aviation Safety Network, a firm that maintains an international database of air accidents and safety issues. "I have not seen any proof in the past that there have been accidents caused by bankruptcies or financial difficulties."


American passengers may notice positive and negative changes in their flights. As the company gives up its older planes, passengers can expect to see more bells and whistles on the new ones, such as modern video equipment, said Parsons. "In five years, they'll have one of the youngest fleets in the country," he said.

Along with that may come more overhead compartments. New planes are being built to accommodate more luggage.


With American's 80,000 employees expected to lose some pensions and other benefits, Parsons expects the company's flight attendants to be crankier than usual. "Those friendly skies will still need some improvement," he said.