Tue November 29, 2011
American Airlines Bankruptcy Might Not Affect Passengers
Even though American Airlines’ parent, Forth Worth-based AMR, filed for bankruptcy today, passengers may see no changes in the carrier’s operations.
Every so-called legacy carrier, including United, Delta and Continental, filed for bankruptcy after the 9/11 slump. American did not. The others restructured operations, business deals, employee contracts and benefits, and emerged making money. Not American.
Now, AMR’s new CEO, Tom Horton, says it’s time. He said in a statement that American’s cost disadvantage compared to competitors is untenable. Plus, the economy, revenue and fuel costs are uncertain and unstable.
So how will bankruptcy affect passengers? Tom Parsons, with BestFares.com, says they probably won’t be affected. Schedules, routes, tickets, services and especially frequent flyer miles won’t change.
“This will be one of the first things American Airlines goes to bankruptcy court to protect,” Parsons said. “This is a very big chunk of change to American, selling air miles. When you make $1 billion a year selling future empty seats and putting that carrot out there, it makes airlines revenue without costing them anything but putting cash in the bank.”
American Airlines is among the nation’s top three carriers. In North Texas, it’s also among the top three employers. Tim Smith, with American, doesn’t expect that will change anytime soon.
“For now it literally is business as usual. Our number of flights and our employment remains steady from where we are yesterday and today,” he said. “That’s our intent to keep it that way as much as possible, because Dallas/Fort Worth of course is our largest hub.”
In time however, CEO Horton says to expect worker and flight schedule cuts. Airline consultant Mike Boyd believes the bulk of American’s savings will come from elsewhere, however. He doesn’t’ expect much of a downsize. Instead, he says savings will come from shareholders and benefit plans.
“For American Airlines, this is about getting debt down, pensions in line. Things like that. nothing to do with the operations itself,” Boyd said. “People who’ve lent the money are going to have to take a haircut, People who have pensions with American are going to have to take a haircut. From a consumer point of view there’s going to be no change whatsoever.”
Boyd expects American could emerge from Chapter 11 bankruptcy in six to eight months. That’s much faster than the allotted 15 to 18 months mentioned by American executives.