What the American Airlines Bankruptcy Means to You

Upon first hearing the news that American Airlines’ parent company filed for bankruptcy, I’m sure there were a lot of travelers asking the question: “Are my tickets still good?”

The answer is an unqualified “yes.”

Read about American Airlines’ Bankruptcy

American Ticket Holders Need Not Worry

Historically, airline filings for Chapter 11 bankruptcy have meant minimal (if any) flight disruptions, and an American spokesman indicated the airline’s schedule will proceed as normal.

Listen as FareCompare CEO Rick Seaney tells Editor Anne McDermott what flyers must know about the bankruptcy:

Remember, too, that the term bankruptcy no longer carriers the stigma or fear that it used to. Certainly the public has gotten used to the idea of Chapter 11, thanks to all those previous airline bankruptcies as well as the auto industry and banking bailouts. In fact, the very term, ‘bankruptcy’ has morphed from something that most of us wouldn’t touch with a ten foot pole, to a metaphorical shrug meaning, ‘business as usual’.

What you may notice – maybe – is a downward effect on employee morale as agents and crews try to figure out what the bankruptcy means to them. It wouldn’t surprise me if the labor force is again asked to make some concessions.

As reported by the Dallas Morning News’ Airline Biz Blog, the president of the Transport Workers Union said, “This is likely to be a long and ugly process and our union will fight like hell to make sure that front line workers don’t pay an unfair price for management’s failings.”

This attitude could in turn trickle down to passengers to make an already painful flying experience a bit worse, but at this point, that’s only a guess.

Will Airline Safety be Compromised?

No. Rest assured that no airline can afford to be tarred with the ‘safety question’ issue. While bankruptcy may be business as usual in today’s economy, no carrier could survive the perception it wasn’t laser-focused on safety, as is American and indeed all U.S. airlines.

Do Miles Club Members have to Worry?

Miles club “elites” tend to be business travelers who pay the big fares and American has no intention of getting them in an uproar so you can assume your miles will be safe despite the bankruptcy.

However, frequent fliers who have concerns do have a couple of options:

  • Redeem tickets on alliance partners (OneWorld) which include Alaska Airlines and several international carriers.
  • Use points for ticket purchases for yourself, for friends, for family members, or use the points to help your favorite charity.

It is likely that if American starts seeing some defections, we’ll see double and triple mile offers to keep consumers in the fold, which makes it a great time to fly and accumulate miles because American – the third-biggest airline in the world – is not going away.

Will American Airfare Prices Go Up or Down?

If for any reason consumers decide not to buy tickets on American, it could drive down airfare prices in the short term, at least temporarily (but don’t look for such deals during prime holiday travel time). Conversely, if American cuts back much more on seat capacity next year, prices could go up on fares to certain cities as capacity comes down.

See the 5 Best Tips to Finding Cheap Flights

Do not look for big price breaks in cities where American has a well-established presence with less competition including Dallas, Miami and New York.

However, we could see some price drops later this year in markets like Boston, Washington, D.C., San Francisco and to a lesser extent, Chicago. That said, much of American’s pricing – or any other airline’s, for that matter – will depend on whether the price of oil goes up or down. If it heads north, so will airfare prices.

In other words, there are no guarantees when it comes to airfare pricing, but if price drops do occur, it might happen in time for Spring Break travel. However, if you shop for such trips now, you could pay too much, so wait until after the holidays to start checking out those fares.

Airline Investor Shock

The entire airline investment analyst community did not think this was going to happen. After all, American had enough liquidity to stave off a choppy economy and higher fuel prices until late next year; however, some pilots have been retiring ahead of this possibility so it isn’t a shock to some insiders as the rumors have been flying around for months.


Published: November 29, 2011