American Airlines Parent AMR Filed for Bankruptcy Protection This Morning – What Happens to Miles and Frequent Flyer Benefits?

The short answer is nothing at least not in the short term. Now all the so called legacy carriers have been to bankruptcy protection and some even more than once.  Continental Airlines, now part of United, went through this cycle twice in the 1990’s, and all the other legacies United, US Airways, Delta, and Northwest, now part of Delta, all went through this same process in the last decade. Some have suggested that AMR made a mistake of not going through this process when all of their competitors did.

During the chapter 11 bankruptcy protection it is easier for airlines to cancel leases and renegotiate other contracts. Quite a few of the other airlines dumped their pension liabilities to the Pension Benefit Guaranty Corporation during their restructuring.

When others went through this process there weren’t any changes for the frequent flier programs imposed by the courts. So, I would say that things are as “normal” as they can under these circumstances. All the equity (stock) holders are wiped out, some of the debtors will become equity holders, some routes are cut, some aircraft leases rejected, pension liabilities moved to PBGC etc. Overall, the real winners are probably going to be lawyers that will rake in huge fees in the process of restructuring.

Here is a copy of an email that I just received from AAdvantage regarding their Chapter 11 restructuring.  You can also find out more about the AA’s restructuring efforts at AA.com/restructuring.