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News > Fortune 500
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US Air flyers: What now?
Liquidation threat means tickets should be bought with credit cards and miles should be protected.
September 13, 2004: 1:47 PM EDT
By Chris Isidore, CNN/Money senior writer

NEW YORK (CNN/Money) - US Airways insists its customers won't see any disruptions due to its bankruptcy filing Sunday, but some travel agents and experts say it's not too soon for passengers to begin taking steps to protect themselves.

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CNNfn's Allan Chernoff takes a closer look at what the filing means for passengers and the airline industry.

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The nation's No. 7 airline filed Sunday for protection from creditors under Chapter 11 of the bankruptcy code, which allows for continued operations. But some analysts have suggested that the airline faces the risk of being forced into Chapter 7, which brings liquidation and a halt of operations, due to problems it could have finding new investors and financing.

This is the second trip to bankruptcy court in two years for US Air. But it emerged from its previous filing in March 2003 with the help of $900 million in federal loan guarantees, which will not be available this time. The airline has not even been able to arrange so-called debtor-in-possession financing, which is normally available to fund operations during a bankruptcy reorganization process.

The tenuous state of US Air means that some travel agents are already booking clients on other carriers, when possible.

"Our agencies are booking away whenever possible," said Steve Loucks, spokesman for Carlson Wagonlit Travel, one of the nation's largest travel agents. "In instances when they don't have a choice, they're booking on the airline through US Airways Vacations, which is a tour brand not owned by US Air."

"The other thing we're doing is making sure the customers pay with credit cards so they can get their money back more easily if the tickets can't be used," Loucks added.

But other travel agencies, particularly those that concentrate on business travel, said they're not seeing any immediate changes in their customer plans.

"Bankruptcy under Chapter 11 is pretty much a non-issue," said Amy Berk of WorldTravel BTI. "We are concerned about their long-term health, but at this point we don't see anything else going on."

Even if the airline halted operations soon, which is not expected by even some of the more pessimistic observers, passengers would likely be able to use their tickets on other carriers by flying on a standby basis.

Frequent flyer miles?

Those US Air customers with large balances of miles in their frequent flyer accounts might want to take steps to protect themselves long term, said Randy Petersen, editor and president of Insider Flyer, an independent publication for members of frequent flyer clubs.

Petersen said that anyone taking future flights on US Air going forward probably want to set up a United Airlines frequent flyer account and have their US Air miles accumulate in that account instead. United is also in bankruptcy, but the larger airline's long-term prospects are seen as better than US Air, according to Petersen and most airline analysts.

Correction
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An earlier version of this story reported that Delta was one of US Air's partner carriers. We regret the error.

Those who have a credit card accumulate US Air miles for their use should also shift to a different airline's frequent flyer club.

Petersen said it's possible to transfer US Air miles to some of its partners' frequent flyer clubs. But there is a significant penalty for doing so, and he said it's probably too soon to make such a drastic move.

Instead, he suggests that people with large balances book a trip nine to 11 months out on a US Air partner carrier such as United, Lufthansa, Air Canada or other members of the Star Alliance.

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"If US Airways survives, as that date gets closer, you can pay your $40 and put the miles back in your US Airways account," said Petersen. "If they don't make it, you've got something you can use that far out. It might be better than having nothing at all."

But Petersen said it's probably too soon to start burning through all your US Air miles immediately as just a defensive move.

"I'm not predicting liquidation for US Airways over the next few months," he said. "Sure, you'll need some Pepto-Bismol, but there's still time to enjoy use of the your miles without senselessly trying to cash them all in."  Top of page




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