Four Things to Know About Flying a Bankrupt Airline

When an airline files for bankruptcy protection, stockholders, employees and creditors have reason to complain. But business travelers shouldn't.

Under Chapter 11 protection, airline operations continue as they normally world, as corporate management finds a way to cancel debt and get business costs in line with the current operating environment. While the cuts to staffing may be deep as the airline radically changes operations, by the time those cuts filter down to the customer level, the impact is rather subtle.

"I hate to sound flippant, but Chapter 11 is really a nonevent as far as the business traveler is concerned," said Eric Henderson, vice president for supply relations at Rosenbluth International, a corporate travel management agency. "It's a seamless experience, in terms of flying a carrier before Chapter 11 and flying after."

Indeed, both US Airways(USALA) and UAL (UALAQ) unit United Airlines were flying under bankruptcy over the last year, and the customer experience was virtually unchanged. In fact, United's on-time performance while it's been in Chapter 11, as tracked by the U.S. Department of Transportation's Air Travel Consumer report, was better than that of any other network carrier.

There's simply no reason to be afraid of flying an airline that's filed for bankruptcy, but here are four things travelers should know if AMR (AMR) unit American Airlines, the world's largest carrier, were to join United, the second-largest, in Chapter 11.

Your Frequent Flyer Miles Are Safe

Of all the uncertainties under Chapter 11, the one travelers fear the most is losing their frequent flyer miles. But a better understanding of the programs and how carriers view them makes it clear that the last thing any carrier wants to do is cancel those miles outright.

Under a frequent flyer plan, carriers reward you for your loyalty to their brand, and a bankrupt airline doesn't want to lose its most loyal customers. So while the airline is under Chapter 11, your miles will be honored. But even in a worst-case scenario, when an airline goes Chapter 7 and completely liquidates its operation, as happened with Eastern Airlines a decade ago, chances are that other carriers will want to acquire that lucrative loyal customer base.