American Airlines bankruptcy won't hurt flyers... now

Wed Nov 30, 2011 9:16am EST

Passangers walk through American Airlines terminal 3 at O'Hare International airport in Chicago November 29, 2011. American Airlines and its parent company AMR Corp filed for bankruptcy on Tuesday after failing to win a labor deal with pilots and suffering from mounting fuel costs. REUTERS/Frank Polich

Passangers walk through American Airlines terminal 3 at O'Hare International airport in Chicago November 29, 2011. American Airlines and its parent company AMR Corp filed for bankruptcy on Tuesday after failing to win a labor deal with pilots and suffering from mounting fuel costs.

Credit: Reuters/Frank Polich

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(Reuters) - American Airlines passengers should not expect any near-term changes after the airline filed for bankruptcy, but the filing may affect their future plans.

Holiday flights should take off as scheduled, and the carrier says it will honor existing reservations and reward miles. "I think everything's cool," said Tom Parsons, head of deals website Bestfares (bestfares.com) and a long-time observer of the airline industry.

But the Chapter 11 reorganization of American Airlines and its parent company AMR Corp could lead to a shakeup in prices, fewer flights and an altered flying experience.

Here are the answers to some key questions:

ARE MY MILES SAFE?

For now.

"I have almost 300,000 miles with American, and there's no sweat on my brow," said Parsons. Airlines tend to protect their mileage programs throughout bankruptcy, he said, because they make money selling miles to credit card issuers, and even passengers trading in miles fill seats and spend money.

American sent a letter on Tuesday to its frequent flyers saying, "We want to assure you that your AAdvantage miles are secure," and noting its intent to honor existing program awards.

But Morningstar airline analyst Basili Alukos said that could change. "My hunch is that, when they come out of bankruptcy, they may make them more difficult to redeem," he said. "From what I understand, they can change this whenever they want."

WILL MY CURRENT RESERVATIONS BE HONORED?

Booked flights are secure, as American said it would operate its regular schedule and honor tickets and reservations. But American could reduce its number of flights. That could mean that not all routes would continue indefinitely.

WILL PRICES GO UP OR DOWN?

American may cut prices to keep planes full and nervous passengers buying tickets for a slow January and February, but those are typical sale periods for the airlines.

"As always we will remain competitive with fares in the marketplace," said Tim Smith, an American spokesman. Parsons said he expects American to price aggressively over the winter, perhaps adding extra miles rewards and the like, to keep up customer confidence.

But the longer-term impact of an airline bankruptcy is higher ticket prices, not lower ones. As American uses this reorganization to get rid of many big, pricey, old planes, it may cut their routes. "With fewer planes in the sky and fewer seats, you may be forced to pay more," said Parsons.

Once American emerges from bankruptcy, it will be less likely to price aggressively, said Morningstar's Alukos. "Future ticket prices should be higher."

WILL FLIGHTS BE SAFE?

Federal safety inspectors have stepped up their surveillance of American Airlines and American Eagle (also owned by AMR), according to the Federal Aviation Administration. "The FAA acts swiftly to aggressively protect the safety of the traveling public any time an airline files for bankruptcy protection," said a spokesperson for the agency.

But that's a typical precaution, and there's no reason to believe that the bankruptcy filing of such a large airline would lead to safety problems. "I haven't seen any connection, not even a hint" that financial problems cause airline accidents, said Harro Ranter, president of the Aviation Safety Network, a firm that maintains an international database of air accidents and safety issues. "I have not seen any proof in the past that there have been accidents caused by bankruptcies or financial difficulties."

WILL THE NEW AMERICAN BE BETTER?

American passengers may notice positive and negative changes in their flights. As the company gives up its older planes, passengers can expect to see more bells and whistles on the new ones, like modern video equipment, said Parsons. "In five years, they'll have one of the youngest fleets in the country," he said.

Along with that may come more overhead compartments. New planes are being built to accommodate more luggage.

WHAT ABOUT THE WORKERS?

With American's 80,000 employees expected to lose some pensions and other benefits, Parsons expects the company's flight attendants to be crankier than usual. "Those friendly skies will still need some improvement," he said.

(Additional reporting by John Crawley. Editing by Beth Gladstone and Jilian Mincer)

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