One of the two major airlines that had not yet filed for bankruptcy or restructuring, American Airlines, gave in and filed for Chapter 11 protection today. The airline will continue to operate its business as usual; if you planned to fly American Airlines, you’ll still be able to do so without any problem. In fact, you may even see lower fares and bonus miles offers while the airline looks to maintain customers through the restructuring.
Chapter 11 allows a company to borrow money on more favorable terms and to cancel contracts, and in a market where almost every other airline has benefited from Chapter 11, American Airlines was finding it difficult to compete without the same benefits. That’s not to say the airline isn’t in trouble. As of yesterday, the stock price was down 79.2% for the year, and as of the time I’m writing this, the price has plummeted to a point where it is down more than 97%. The New York Stock Exchange has suspended trading of AMR shares.
Filing for bankruptcy is a reversal of policy from American Airlines, whose spokespeople have long said the company is healthy despite financial losses and the expectation for that lack of performance to continue.
Now might be a great time to purchase American Airlines flights for after the holidays. Since bankruptcy protection is normal for airlines, with Southwest being the only major carrier left never to have filed, there’s no reason to believe American Airlines’ services will be going away anytime soon.
Updated September 8, 2016 and originally published November 29, 2011.