No, American Airlines will not declare bankruptcy…

My friends, I find the idea that American Airlines is in danger of filing Chapter 11 bankruptcy a fanciful illusion. I don’t see that happening, nor do I find such speculation helpful.

Bankruptcy at American Airlines? Very doubtful.

At a basic level, there is an inherent risk of bankruptcy in any business. Just as there is a risk of me being struck by lightning or a motorbike or dying from a deadly mix of monkeypox and coronavirus.

I’m not trying to be facetious. Certainly, I can point to warning signs at American Airlines. Indeed, there is debt. Yes, interest rates are rising and a recession is looming. Admittedly, labor relations are strained and new contracts are being negotiated, with the two parties being far apart.

But I can also plead bankruptcy (albeit different) for United, Spirit, Alaska and JetBlue.

Ultimately, I don’t see any signs to suggest that American Airlines is actually considering the “nuclear option” and I don’t find it worth speculating about that until we’ve taken that route (until AA cannot repay its debt or a strike is called or demand collapses once again).

Millions of people read this blog and others on the Boarding Area Network. I don’t want to flatter myself with the reach of live and fly, but I also don’t want to deter people from booking trips on American Airlines for fear of bankruptcy. Many people do not understand that declaring bankruptcy under Chapter 11 does not mean liquidation, but debt restructuring. Even so, I don’t even think Chapter 11 will be necessary unless strong headwinds hit the entire industry.

(And if that happens, Uncle Sam is always ready to bail out US airlines)

Thus, I would always book travel on American Airlines if the schedule and price made sense. American Airlines has no risk of bankruptcy and I would rate the likelihood of bankruptcy of any chapter at this point at similar levels.

Again, I was wrong before… allow me to spice this piece up with a bit of humility and a personal note.

I remember the day American Airlines filed for bankruptcy in 2011. Why? Because I panicked I sold all my AA stock at pennies on the dollar, lost thousands of dollars, then saw the stock wasn’t canceled and was steadily rising as the airline came out of bankruptcy.

Don’t panic people. No matter what, American Airlines will always be with us, always fly, always have AAdvantage, and always be a source of debate.


> Find out more: American Airlines going bankrupt? (An article I wrote in 2011 two months before AA declared bankruptcy)
> Find out more: What the American Airlines Bankruptcy Filing Means to You (Another article I wrote in 2011 right after the bankruptcy filing)


CONCLUSION

Talking about bankruptcy is premature and counterproductive. Let’s stick to operational reliability, ongoing labor negotiations, and try to convince AA not to decimate the AAdvantage program. Maybe I haven’t learned anything over the decade, but this doesn’t seem like a situation like 2011.

picture: American Airlines

Comments are closed.