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This won’t happen. They will survive.
I don’t see much likelihood of an AA C11 filing (and they just got more cash). I believe in every past bankruptcy, including where AA purchased only the assets of TWA, miles survived and weren’t devalued. Bankruptcy courts recognize that devaluing loyalty programs will lead to an exodus of customers and decrease the likelihood of emergence from bankruptcy (and decrease the value of assets). In some cases, like with Virgin Australia and Avianca bankruptcies this year, the loyalty program itself is a separate entity that didn’t file for bankruptcy.
The program itself is collateral for loans based on the $4.4B in annual revenue it generates and past “successful” spin-offs of loyalty programs at higher valuation multiples (Air Canada was the first and they recently bought their program back, calling into question the value of a spin-off). Diluting the value of miles would actually diminish the value of the loyalty program as a collateralized security, further decreasing the likelihood of AA doing so (and it may be prohibited in the securitization agreement as well as in co-brand credit agreements).
The miles will survive, though I’m sure they’ll be devalued even more (not that they’re worth much at this point)
they have already put all the miles on their books as collateral for loans
The US government will never let a major player like AA fail
Citi won’t let the points go away.
They won’t go bankrupt, at least in the short term. The fed committed to buying corporate debt so they can just issue bonds to stay afloat for the next several months.