What Does American Airline Bankruptcy Mean to Passengers?

By US Daily Review Staff.

This week AMR, American Airlines’ parent corporation, announced it was seeking chapter 11 bankruptcy protection due to significant losses over the last few years, leaving many passengers to ask what protections they have in the event American Airlines fails.

  • There is risk that your ticket will not be honored by AA should their restructuring fail.
  • If you have frequent flyer miles, book your trip now, preferably on a code-share partner of AA that is not at risk of bankruptcy.
  • Ticket holders are unsecured creditors, last on the list of creditors, so if AA shuts their doors there will be little to NO relief for affected ticket holders.
  • Reciprocity rules, under which airlines were required to honor other airlines’ tickets in cases such as this, expired in 2007. Ticket holders will be left holding the bag if AA does fall.
  • Some airlines may have insurance to guard against passenger loss in this situation, but we don’t know if American Airlines has insurance that would cover the kind of volume that AA would have to cover if they fail entirely.
  • American Airlines’ refusal to take bailouts was admirable.  They wanted complete management control with no government intervention, but it appears that need for control was fatal.
  • It appears that they filed bankruptcy because of high labor costs and extremely large management bonuses.   FlyersRights hopes that other air carriers will take note.

According to a company statement, “FlyersRights.org is the largest non-profit airline passenger rights organization in the world with 50k members.”

All opinions expressed on USDR are those of the author and not necessarily those of US Daily Review.

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