Just weeks before one of the busiest travel times of the year, American Airlines’ parent company filed for bankruptcy protection. But don’t worry: Your plans to head home for the holidays aren’t likely to be interrupted.
If the previous bankruptcies of Delta and United can tell us anything, travelers won’t be affected anytime soon by Tuesday’s announcement that AMR Corporation, which owns American Airlines, had filed for Chapter 11.
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“Tickets won’t be an issue because of the kind of bankruptcy they’re filing,” says co-founder and CEO of farecompare.com Rick Seaney, who said neither the negotiations between the airline and its creditors nor a possible spinoff of American Eagle will have much of an impact on travelers.
Until this week, American Airlines was the last legacy airline hanging on without filing for bankruptcy. Its two main competitors, Delta Air Lines and United Airlines, both filed for bankruptcy within the last several years, allowing them to shed billions in costs, renegotiate labor contracts and merge with smaller airlines. American tried hard to stave off Chapter 11, but just couldn’t any longer. The bankruptcy will likely enable American similarly to reduce labor costs and get rid of debt.
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Frequent flyers can breath a sigh of relief as well: They won’t have to queue up with creditors to take advantage of all those loyalty points they’ve collected. In a note sent to the airline’s frequent flyer members on Tuesday, American said it would be “business as usual” and promised its customers that their miles were secure and that the airline would honor all tickets and reservations.
“Typically airlines are not going to do anything to upset their most lucrative customers, the ones that have frequent flyer miles,” agrees Seaney. “Not only do they protect those miles, we may see bonus programs.”
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Randy Petersen, founder of milepoint.com, says he expects a spike in reward redemption. “There will be an additional burn of miles,” he says, citing the 10% to 11% jump in reward redemption during the United and Delta bankruptcies.
But any bonus programs, he predicts, will be aimed only at the most frequent flyers. “But we’ll probably see a promotion that will keep their elite members. American will only survive if they keep their most frequent flyers. Any promotional efforts will be toward elite flyers, not everyday flyers.”
A bright spot might also be an eventual decrease in ticket prices in smaller markets like Boston, Washington, D.C., Las Vegas and Orlando, where there are more leisure passengers, says Seaney. American may try to lure some of those customers with more competitive airfares. “If you have two airlines that have the same schedule and the same prices, you’re going to go with one that’s not in bankruptcy,” he says.
But American will probably be the last airline to increase fares, something travelers may want to consider when they’re thinking about booking flights early next year. “American will probably wait to match an increase in fares by other airlines,” says Petersen. “They don’t want it to look like they’re going out of business.”
