US Airways Files for Bankruptcy

September 12, 2004
US Airways filed for bankruptcy today after talks with its labor unions broke down. It is the second time the troubled East Coast carrier has entered bankruptcy and many analysts think it will be the last.

US Airways emerged from the first bankruptcy courtesy of a $1 billion loan funded in part by U.S. taxpayers. This time around the carrier may have more trouble arranging financing.

In the near term, the filing should have no effect on travelers. The airline will continue to fly its normal routes and honor its reservations while it tries to come up with a reorganization plan. Long-term, US Air faces liquidation if it can't devise a realistic business plan.

For now, there's no reason for fliers to avoid US Airways. Anyone who already has a reservation should honor it, since normal cancellation fees will continue to apply.

Even if the airline is forced to liquidate, other carriers will be required by law to honor its tickets, so travelers would not be stranded though they might encounter delays and disruptions in their planned itinerary.

It's important to pay for tickets with credit cards, since the Fair Credit Billing Act calls for consumers to get their money back if the ticket isn't honored. Consumers must submit their dispute within 60 days of their ticket purchase.

Frequent-flier awards will continue to be honored during the Chapter 11 bankruptcy. However, if the airline liquidates it's not clear whether other airlines would be obligated to honor free tickets issued to frequent fliers.

While frequent-flier miles will continue to accumulate during the bankruptcy, it's not clear what will happen to the miles if US Airways goes out of business. Competing airlines might choose to honor them but there are no guarantees.

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