The holiday season is usually a time to spend, spend, spend, but American Airlines’ parent company, AMR Corporation, has filed for bankruptcy to reduce labor costs and shed billions of dollars in debt. According to the New York Times, AMR is the last of the major legacy US airline companies to file Chapter 11.
For the past 3 years in a row AMR has posted losses, including a $471 million loss last year. Major airline companies cut their costs as a way to compete with low-cost carriers like Southwest Airlines.
So what does American Airlines’ bankruptcy mean for travelers? Well, company officials say it’s business as usual, and the airline will operate normally throughout the bankruptcy process. And you can rest easy if you’re enrolled in one of American’s frequent flyer programs. Plans to restructure the company are not expected to affect the number of travel miles you’ve clocked.
I have to admit I was a little worried at first, especially after I doing a little fare surfing last night for a cheap airplane ticket to Miami. Today, I received an email telling me not to be alarmed about my membership to the AAdvantage frequent flyer program. Part of the email states:
“The AAdvantage miles that you’ve earned are yours and will stay yours, subject to usual policies, until you choose to redeem them for a great award with us. Likewise, your elite qualifying miles and your elite status, including lifetime status granted under the Million Miler program is secure and remains intact.”
So no worries for now, frequent flyer members will still be able to redeem miles for flights, upgrades, car rentals and hotels. The airline has plans to create more opportunities for frequent fliers to earn miles and redeem them for more perks.
That’s great news for travelers, but it’s a different story for unions. American had been in contract talks with unions until the negotiations stalled earlier this month when the pilots’ union refused to send a proposal to its members for a vote. Federal bankruptcy rules allow companies to reject a contract, which means AMR may take a harder stance on negotiating with its unions.
In addition to labor negotiations, contracts to lease aircrafts may be halted due to AMR’s bankruptcy. AMR officials say the company had “no choice” but to begin canceling contracts on a number of planes, stating that the carrier could not afford to maintain all of its leased aircraft at their current rates.
Regardless of the fallout from its bankruptcy filing, AMR has already made plans to introduce new planes, Airbus A320s and Boeing 737s, to replace the company’s older planes. The airline could see an upturn in profits like Delta and United Airlines did. Delta partnered with Northwest, and United teamed up with Continental, allowing those airlines to finally make a profit.