AA Files for Bankruptcy

(Dive Travel Business - December 1, 2011) --  With rising fuel costs, staggering labor costs, and an uncertain economy, American Airlines filed for bankruptcy protection on Tuesday Nov 29, 2011. AMR, the parent company of American, moved to reorganize the struggling operation and reassure passengers that the filing would not affect regular operations.  Booked flights are secure, as American said it would operate its regular schedule and honor tickets and reservations.

American Airlines passengers should not expect any near-term changes, and may even see better fares if American chooses to cut prices to keep planes full and nervous passengers buying tickets for a typically slow January and February sales period.

However, in the longterm, the Chapter 11 reorganization could lead to  fewer flights and cut routes, and therefore fewer available seats, leading to higher prices and an altered flying experience.  And with American's 80,000 employees expected to lose some pensions and other benefits, along with an anticipated cutback in staff, service quality may suffer. The company's flight attendants may be crankier than usual.

American's AAdvantage is the oldest and one of the nation's largest airline frequent-flier loyalty programs. With passenger concerns about the status frequent flier miles, American sent a letter on Tuesday to its frequent flyers saying, "We want to assure you that your AAdvantage miles are secure," noting its intent to honor existing program awards. 

Airlines tend to protect their mileage programs through a bankruptcy. The last thing an airline wants to do is alienate their most frequent and profitable customers. These programs also generate revenues as the airline earns selling miles to credit card users. Even passengers trading in miles will fill seats and spend money. But looking ahead, industry analysts point out that AA may make AAdvantage Miles more difficult to redeem when they come out of bankruptcy.

Many dive travelers take dive vacations all over the world based on AAdvantage miles. In this climate, the value of AAdvantage frequent flier miles will likely decline. Frequent Flier pundits suggest that if you have Aadvantage points to plan your vacation now and spend those points. If more miles are needed than expected use them. If you can't plan a trip, consider redeeming your points for non-airline benefits such as merchandise.

American passengers may notice some positive changes in their flights. As the company gives up its gas guzzling older planes, and replaces them with more efficient planes, passengers can expect to see more bells and whistles on the new ones, like modern video equipment. New planes are being built to accommodate more luggage, with larger overhead compartments.

Until it filed for Chapter 11 protection, AMR represented the last major network carrier in the U.S. to avoid bankruptcy in the tumultuous decade since the Sept. 11, 2001, terrorist attacks. Although AMR has reported steep loses over the last year, many of its competitors that renegotiated labor contracts and debts in the bankruptcy process over the last decade have enjoyed strong profit margins more recently. AMR reported a loss of $162 million in the three months ended Sept. 30, while its top competitor, the parent company for United and Continental airlines, reported a profit of $773 million during the same period.

Additional Source: Forbes.com

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