American Airlines to Settle Two Frequent-Flier Lawsuits

AMR Corp.’s American Airlines, the second-largest carrier, agreed to award as many as 5,000 frequent-flier miles or ticket discounts to more than 4 million AAdvantage program members to end a legal dispute.

The settlement accord covers two suits brought by American passengers. The first, filed in 1988, claimed American committed breach of contract and fraud by restricting seats available to AAdvantage members and the dates when frequent-flier miles could be redeemed. The second suit, filed in 1995, challenged an increase in the mileage needed to earn a free ticket.

The value of the settlement will depend on whether AAdvantage members select cash vouchers or frequent-flier miles. They will typically be allowed to select ticket vouchers valued at $25 to $75 or receive 1,000 to 5,000 frequent-flier miles. If half receive $25 in vouchers, the settlement would have a value of at least $50 million.

“Litigation is protracted, it is very costly and there are a lot of uncertainties involved,” American spokesman Al Becker said. “We felt like it was in our best interest, and the best interest of the AAdvantage program, to settle it.”

AAdvantage, created in 1981, was the first frequent-flier reward program and remains the industry’s largest, with more than 35 million members. American maintains that the terms of the frequent-flier program always permitted changes, which the carrier has made in the years since the suits were filed.

The settlement accord, negotiated late last year, has received a judge’s preliminary approval. A September court hearing in Chicago has been set for deciding final approval.

AMR shares fell 88 cents to $27.94 on the New York Stock Exchange. The shares have declined 6.9% in the past 12 months, while the American Stock Exchange Airline Index has fallen 4.2%.