American Airlines after Chapter 11

Steve Chiotakis Nov 29, 2011

Steve Chiotakis: The parent company of American Airlines today filed for Chapter 11 bankruptcy protection, saying labor and fuel costs are to blame. The company says none of American’s flight operations will be affected by the bankruptcy.

George Hobica is an airline travel analyst and has the website, He’s with us live from New York City. Hey George.

George Hobica: Good morning Steve.

Chiotakis: What impact are we talking about for consumers?

Hobica: For consumers, not a lot. I think they are going to honor all frequent flyer miles. They’re going to have bonus frequent miles. We’ll probably have fares sales to lure people back. There may even be some silver linings. If you’re an employee, retiree, a stock or bond holder, the impact is going to be pretty major.

Chiotakis: What does this say about the climate, George, for airlines in the U.S. right now?

Hobica: Well, it’s kind of sad. I mean, American Airlines was our iconic flag carrier for many years. It was a very innovative airline.

Chiotakis: They were No. 1, right?

Hobica: It was No. 1. They developed the frequent flyer program. They developed the sAAver system. They developed yield management. It was the most innovative airline. And It’s really sad to see the airline in such a state. We’ve so much consolidation in the industry. We really now only have two major legacy carriers — United and Delta. And the question is: Will American seek a merger partner in the future?

Chiotakis: You think it’s going to survive?

Hobica: I think they’ll survive. I don’t know what shape. I don’t know in what shape. Are the going to grow their way to profitability, or shrink their way? I mean we saw TWA and Pan Am — which were the two major iconic flag carriers in the past — go into Chapter 11. It’s not inconceivable that American goes into Chapter 9 if they can’t consolidate.

Chiotakis: George Hobica from George, Thanks.

Hobica: Thanks Steve.

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