American Airlines Files For Chapter 11 Bankruptcy.
Nervous about your miles? Don’t be. And it’s not just because AA says not to worry.
Continental, Delta, United, and USAirways have all gone through chapter 11 in recent years without any harm done to their mileage programs. The point of chapter 11 bankruptcy is simply to reduce the cost structure of the airline, not to shut everything down.
Mileage programs are extremely profitable for the airlines as they get to sell billions of dollars worth of miles to credit card companies and other incentive programs while primarily giving away seats that likely would have gone out unsold.
American Express helped Delta and Chase helped United by prepaying for massive amounts of miles when they were in bankruptcy court. I’m sure Citibank will do that same with American. That also provides a nice hedge against devaluing of their mileage programs as they won’t want to upset the banks that have bought billions of dollars worth of miles that are keeping the airlines afloat.
If there are any major hiccups in bankruptcy court, such as the threat of liquidation, that will be the time to start burning AAdvantage miles on partner airlines, but for now there’s no threat of that at all.
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15 Comments On "American Airlines Files For Chapter 11 Bankruptcy."
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Thanks for the update Dan
Do you have any idea when they will be done with all this chapter 11 stuff? Also, i don’t understand why they were so bankrupt in the first place… they were charging the same amount for fares as all other airlines! How did they manage to go so into the red?
Dan, to clarify, I will not lose my miles? or do I have to use them as soon as possibly
@moo:
Bankruptcy is about reducing costs, the other airlines all did to get their costs down, so AA was at a disadvantage. Now the playing field will be more level.
@Yossi:
Your miles are safe.
what about the aa gift cards bought through amex? any idea on those?
please advise best way to get the most for the miles:
use avios and book 3 trips for kid in yeshiva to fly rt on aa from ord to phl for 15k (have 50 or possibly bit more)
or use the avious to fly on aa to a vacation destination on the coast for 20k rt instead of aa 25k which would blow 100k of my aa miles. (unless i should still be saving them)
please resend info where to contact aa to see if they will status match with alaska mvp. i tried a while ago but never heard from them. also now they are partners, whats the best way to get them to honor it? mvp expires end of dec
Can anyone please answer me, bh I dont know these things. Why is it better for the company and us if they claim chap. 11? How is it helping them, and how could they continue to go further with the same name etc.? Thanks
because chapter 11 is a reorganization bankruptcy. The court will allow them the ability to negotiate with their bondholders and other creditors thus lowering their borrowing costs and over all debt ratios. Another main advantage is the ability to lower labor costs as all those ancient union agreements and unaffordable pension contracts could be rejected and renegotiated.
I have $600 in AA gift cards is that a concern?
@eli: @mords:
Those are safe as well.
Hi I work for Citi, first with Citibank and recently switched to Citicards. With citibank i managed programs that sent out e-mail and direct mail offers to our cards customer base, offering incentives to open a checking account. For our AA card members,we currently offer 23,500 for a citigold account or 10,000 for a citibank to targeted existed card members (ECM’s). They used to be higher but we had to lower them due to the cost of the miles. AA charges us .0188 per mile – and has for a while. We have been prepaying for several months already (they made that switch on us a few months ago). By we I mean citibank, I don’t know the deal they have with Citicards who mail out offers to open cards (that is the team I am joining soon).
When we gave out 30,000 miles that equates to $564 CPA in contra revenue expense. Compare that to the cash corrolary that we give our dividend card members ($150 cash for citigold or $100 for Citibank) and our AA customers are so much more expensive. Our “partner” charges us incredible amounts for miles… but their populations are always the most responsive which is why we keep paying up.
Dan I love your blog and can give you some information if you ever want to hit me up. In my new role with Citi cards (direct mail team) I will be part of a team managing offers tens of millions of direct mail pieces monthly, which include a few rich offer tests. Soon I will be an expert on all Citicards rewards and know what will be upcoming.
Peace,
S
will this affect the BA/avios miles in any way?
Good time to buy AMR stock?
What do you think will happen to platinum for life if us air takes over
@S from Citi: so any big bonus sign ups in the near future