Ok, so we've talked twice before about people making stupid speculative buys into the airline stocks when it's clear they're going out of business. The most recent was just yesterday. Well, once again...traders bid up shares of Northwest (NASD: NWAC) yesterday, to the tune of 19%, only to see it lose over 50% after horus when they declared bankruptcy. Very little sympathy here, since all the news was about how a bankruptcy filing would come any day.
Oh yeah, and Delta (NYSE: DAL) declared as well yesterday leaving only American (NYSE: AMR) and Continental (NYSE: CAL) as the only incumbents not having declared bankruptcy.
Business Question: So everyone knows that creditors have first pick of a company's assetts in a bankruptcy proceeding...but who has next priority shareholders or frequent fliers with all of their built up miles? Anyone who knows, please post for the benefit of our readers.
The answer to your question is shareholders. The law gives very little, if any, recourse to holders of frequent flier miles. All of the frequent flyer program agreements reserve the right to make changes or eliminate awards. These provisions have been upheld by courts, the most notable decision being Benway v. American Airlines (see description of case at http://www.webflyer.com/travel/political_issues/benway.php)
Posted by: josh | September 15, 2005 at 08:03 AM
Thanks Josh!
Posted by: A Stalwart | September 15, 2005 at 09:14 AM