AA Chapter 11?? ...Do we lose our Frequent-Flyer miles?
 

I see an article today (quoting Bloomberg) about AMR (parent company of AA) expected by some analyst to "succumb to bankruptcy"...

I have a lot of miles with AA which I'm keeping for 2 business-class tickets to Europe in a couple years.

I'm sure this was dealt with years ago when United was going into Chapter 11, but I'm asking ------ If AMR asks for bankruptcy protection -- do we lose our Frequent-Flyer Miles? Or do we lose them all only if the company stops all its operations?

...Thanks.

Interesting question. I googled it and here's an article that discusses the issue. There isn't, apparently, a clear cut answer: http://tinyurl.com/3gtdz5r

I think the general consensus is that our AAdvantage miles will be fine. Remember that United, Delta, US Airways, Northwest, and Continental all went into Chapter 11 in recent years. (Continental did it twice.) Their FF programs and everybody's miles remained in place untouched.

Gardyloo would have more insight here. :)

Agree with similar discussions on Flyer Talk ..... airlines who've filed Ch. 11 and restructured have maintained their frequent flyer programs. And since it was American Airlines who created this marketing tool for customer loyalty, they should really understand how eliminating AAdvantage program would cause an uproar.

http://www.flyertalk.com/forum/ameri...-bankrupt.html

Thanks for your help. I guess I shouldn't worry that much. I hope.

Been through it with DL and CO now with AA

In all others stock went to 0 but NEVER lost a

single FF mile.

Did have 18K of AA miles expire on me a couple of years ago

still pod with them bout that but got even by opening 2

AAdvantage cards picking up 80000 miles booking 2 TA tickets

and closing card about a month ago...

so use them or lose them book hotels flights whatever just

to be safe that is what my wife and I did recently.

odds are they will retain AAdvantage very profitable for them

The big AMR stock liability is their old pension plan

Just like DL and CO they will get out of that issue new stock

and come back stronger than ever.

AMR was the only US major NOT to do this so was just a matter

of time.

The only major I know of lately to go belly up and stay there

was Mexicana..

So odds are good you will be fine but personally them

ASAP so no worries... Good luck to u and me too!

Of course, all the above comments assume Chapter 11, which is most probable. But if the very improbable Chapter 7 occurs, say bye bye the miles.

People don't seem to realize that FF programs are incredibly profitable to the airlines. A few years ago Air Canada was faced with bankruptcy, so they sold their FF program, Aeorplan, to an independent company. At the time, the value of Aeroplan was greater than the rest of the airline.

The key is that the airlines get cash when they sell the miles to the credit card companies (nobody knows exactly how much, but probably less than 1 cent per mile.) The credit card companies (or florists, or rental car companies, or merchants.. whoever) then re-sell those miles to their customers, who pay for them in the form of higher annual credit card fees, or as part of the markup the card issuers charge to the merchants, whatever.

The redemption value of the miles go onto the airlines' books as liabilities, but there are some catches. First, most people who do redeem their miles do so for coach tickets, the effect of which is very minimal in terms of the airlines' operating costs.

By only releasing seats that would otherwise go unsold, according to the airlines' yield management calculations, filling the seats with mileage redeemers is a twofer - it takes those miles out of the liability column, and it fills empty seats with very, very little extra marginal cost - a little more fuel, maybe, a microscopic increase in cabin cleaning etc. costs. The redemption pax pay for checked baggage, pay for meals - all of which are profit centers now - so the airline lose even less.

But then, the other big factor comes into play - orphan and unredeemed miles.

Nobody knows the "leakage" numbers, but there are millions - maybe billions - of FF miles/points that <i>never get redeemed.</i> They sit around in quantities too small to be worth anything, then after 18 months or whatever, they expire. So the airline got paid when they sold the miles, but never have to incur any expense when they die. Cash. Cow. (PS the same thing applies to gift certificates you buy for Aunt Lucy for Christmas. Lots of them never get spent.)

So if AA goes into bankruptcy, the chances are that the AAdvantage program will be just fine. It will be an ongoing source of free cash, something the bankruptcy trustee(s) would be foolish to discard.

Thank you, Gardyloo. That's a great explanation. :)

Thanks, Gardyloo and all. Those (almost 300,000) miles I've been accumulating have been there for that one trip, so I really don't wanna to lose them....

OK, one less thing to worry about....

.....Any updates on this issue? Some friends today were telling me there are rumors we might lose our FF miles, or some of them.....

thanks for that explanation, gardyloo.

Gardyloo's post was definitely informative and helpful ...I was just wondering if there's been ANYTHING NEW about this issue that I might have missed, especially after I heard those rumors from couple of my friends who fly a lot....