After being the only major airline in the US history to not have filed one, American Airlines and its parent company AMR Corp filed for Chapter 11 bankruptcy protection today.
There had been speculation going around ever since AMR shares suffered a hug 40% drop in October that airline may file for bankruptcy sooner or later to cut costs specially its labor costs which are currently the highest in the industry but the timing of this announcement seems to have caught everyone by surprise. While the bankruptcy protection gives AMR some elbow room in its ongoing discussions with the pilots and other work groups, it also renders the airline a ripe target for takeovers in an industry that is currently in a very fluid state due to high operational costs specially fuel and labor.
As per its Chapter 11 bankruptcy filing in a New York court, the company listed assets of $24.72 billion and liabilities of $29.55 billion and around $4.1 billion in cash. During the 18 months of bankruptcy protection that the airline is seeking both American Airlines and its regional carrier American Eagle were expected to fly normal schedules. The airline has also stated that it would be business as usual all during this time so the transatlantic venture with IAG members British Airways and Iberia is expected to be operating smoothly all during this time.
With this all focus now comes down to American Airlines frequent flier program AAdvantage, which is a cash cow for the company and may prove to be a decisive tool in this whole process just like the Delta FFP proved to be for its parent Delta during its bankruptcy protection when American Express brought loads of miles from them which provided a very valuable lifeline. A similar kind of step maybe expected from Citi but as of now that’s to early to say whether such things materialize or not. As for now the best advice would be burn the accumulated miles with the AAdvantage program as the program seems to be not going anywhere for some time to come but in the long run no one really knows how things turn up.