Bankruptcy Talks Trouble AA Frequent Fliers

So, what happens to those unused frequent flier miles, if an AMR bankruptcy were to occur ?
What if you were sitting on a stash of unclaimed miles?

Thousands of frequently fliers are worried that their gold mine of AAdvantage frequent flier miles may not be worth a penny if the rocky financial situation at AMR Corp. - parent company of American Airlines continues to spiral downward.

"There’s some concern out there," said Tim Winship, publisher of FrequentFlier.com, who has received emails from worried fliers.

But if AMR were to file for protection from its creditors under Chapter 11 of the bankruptcy code, American "would continue operations more or less as normal while restructuring its debt and labor agreements," Winship said.

George Hobica, founder of travel website Airfarewatchdog.com, agreed that Chapter 11 should have little impact on frequent flier miles accrued. "Miles would be protected, since they’d keep flying," Hobica said.

Still, not everyone is as optimistic.

"People have a tendency to think of frequent flier miles as money in the bank, but it’s not like that at all," said Edward Hasbrouck, author of The Practical Nomad travel books and a policy analyst with the Consumer Travel Alliance.

Hasbrouck said American has no contractual obligations to the frequent flier mileage holder and it could change or eliminate its frequent flier program at any time - bankruptcy or not.

"If they’re in bankruptcy, the decision of whether to do so will not be made with any consideration of the interest of the frequent flier holders," he added.

Hasbrouck advises customers with miles to "use them up now" if they have the chance.

Still, at least one frequent flier isn’t ready to redeem his nest egg of nearly 1 million miles.

"I’m not worried about my stash in the slightest," said Gary Leff, co-founder of Milepoint.com, a frequent flier community, who is a lifetime Platinum AAdvantage member.

Leff said the AAdvantage program is likely profitable on a stand-alone basis and could survive as a separate entity in the unlikely event of the airline’s liquidation.

In 2010, American generated an estimated $1.37 billion in annual revenue from its frequent flier program, according to a recent report from Wisconsin-based IdeaWorks, which analyzes frequent flier and other loyalty programs.

Most of the revenue comes from frequent flier miles purchased by individual members, other airlines and program partners, including banks, the report noted.

Experts say that if the airline were to cease flying, the frequent flier program would likely continue in one form or another.

Posted in American Airlines Bankruptcy , AMR Bankruptcy , Chapter 11 Bankruptcy