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Airline Bankruptcies In Europe Vs North America  
User currently offlineg500 From United States of America, joined Oct 2011, 897 posts, RR: 0
Posted (1 year 5 months 5 days 19 hours ago) and read 5304 times:
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What are the main differences of an airline going bankrupt in the U.S or Canada vs the E.U?? Everybody is talking about the "end being near for SAS" because they're close to bankruptcy.

Here in the U.S several majors have gone bankrupt (a couple twice), only to comeback leaner and stronger..

Unless I'm missing something, it seems like in the E.U declaring bankruptcy means your lenders are about to take everything you own and close the shop

135 replies: All unread, showing first 25:
 
User currently onlinerutankrd From United Kingdom, joined Sep 2003, 2825 posts, RR: 7
Reply 1, posted (1 year 5 months 5 days 18 hours ago) and read 5317 times:
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You ill have read my post on your earlier thread but i'll repeat it to start the conversation here.

In the case of the UK Administration need NOT lead to closure or immediate trading cessation.

Restructuring can be allowed , however since businesses end up loosing credit lines having drained cash flows suppliers demanding up front payment then mounting tax demands and extortionate Administration charges made on the business the administration practitioners seem more interested in:

Sale of assets, trade names, intellectual property and immediate mass redundancy (this costs them nothing because statutory redundancy is recoverable from the state !)

Their prime objective is getting what monies owed in paying taxman and themselves (The Administration Insolvency Practitioner) and screwing everyone else !

This leads to closures in many businesses that might survive with something closer to Chapter 11.
The losers are all creditors and shareholders . Benefactors insolvency practitioners such as KPMG , Deloitte, and Ernst and Young.


User currently offlineanstar From United Kingdom, joined Nov 2003, 5081 posts, RR: 6
Reply 2, posted (1 year 5 months 5 days 18 hours ago) and read 5317 times:

In the US you can enter a bankruptcy and be allowed to continue to operate but clear debts and reduce costs... in most other parts of the world bankruptcy means you have run out of cash and that is the end of the road - no chance to renegotiate contracts etc and the shop is shut.

User currently offlineLufthansa From Christmas Island, joined May 1999, 3197 posts, RR: 10
Reply 3, posted (1 year 5 months 5 days 18 hours ago) and read 5315 times:

Okay having a degree in economics I have been going on about this for years.... so here is my big point.

IT DISTORTS THE MARKET!

the US chap 11 laws are a get out of jail free card. Now i know its tough on all involved. But think about this. I Run Air XQY. I spend too much trying to survive, and I pay more than I should to survive a strike and get everybody onside. AA, who is 100 times larger than me doubles their frequency per day to get me off the route because i'm hurting their yeilds by being there. The end is obvious.... so in a desperate attempt to survive I price to grab market share off AA. ... the end obvious happens and I get swollowed up by Air ABC. and the cycle continues. the problem is. If AA was well run... and it had to cut cost below the market level to survive... and ate into its capital to do so... it is now competing with an entity that should have gone broke. add chap 11 into that... and it gets 1000 times worse. Politics comes into it. No mayor wants their city to lose its hub status because businesses and intercontinental connectivity go with it. so they fight it. they pass laws that are get out of jail free cards. chap 11 basically says the creditors can get more as a going concern than as a whole. but at the end of the day...they took a risk and extended credit. if it looked too risky they shouldn't have done that. the same thing gives some (but not all, delta is a great example of a balanced company) employee groups the incentive to push a little too much via the union. get the point? it stops everybody facing reality. Europe right now is in this very very painful restructure process. But the rise of carriers like norwegian show its perfectly viable to do things differently. some just believed it would never happen. chap 11 distorts the free market. You extend credit you take a risk... no get out of jail free cards as far as I'm concerned. This is NOT the free market. Its playing favourites.


User currently offlineg500 From United States of America, joined Oct 2011, 897 posts, RR: 0
Reply 4, posted (1 year 5 months 5 days 14 hours ago) and read 5316 times:
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Quoting anstar (Reply 2):
in most other parts of the world bankruptcy means you have run out of cash and that is the end of the road - no chance to renegotiate contracts etc and the shop is shut.

that's harsh but i do like that system, sort of "let the strong survive, and the weak perish"


User currently onlineBMI727 From United States of America, joined Feb 2009, 15499 posts, RR: 26
Reply 5, posted (1 year 5 months 5 days 14 hours ago) and read 5317 times:

Quoting Lufthansa (Reply 3):
the US chap 11 laws are a get out of jail free card.

No they aren't. The only way for a bankruptcy to be successful and result in a restructuring is for the creditors and investors to buy into the plan. If that does not happen, the company is finished and will be liquidated anyway.

Chapter 11 is a temporary protection of a company's assets while they work to come up with a plan that the court and creditors can (mostly) agree on to fix the problems that caused the bankruptcy. Without that, the company is still dead. None of that could be considered a Get Out Of Jail Free Card without a serious dose of ignorance.

Quoting Lufthansa (Reply 3):
You extend credit you take a risk... no get out of jail free cards as far as I'm concerned.

So why would you not want a mechanism to possibly allow a debtor to restructure rather than just take a default? If you don't like the restructuring plan, the creditor can come out against it and there's a good chance they'll get their default.



Why do Aerospace Engineering students have to turn things in on time?
User currently offlineLufthansa From Christmas Island, joined May 1999, 3197 posts, RR: 10
Reply 6, posted (1 year 5 months 5 days 13 hours ago) and read 5316 times:

Quoting BMI727 (Reply 5):
No they aren't. The only way for a bankruptcy to be successful and result in a restructuring is for the creditors and investors to buy into the plan. If that does not happen, the company is finished and will be liquidated anyway.

READ WHAT I SAID.... the company, if run bad HAS NO RIGHT TO EXIST! it is a get out of jail free card. You extend credit to somebody who mismanages it, it's your bad luck. As a creditor you lose. THAT is the free market, and that is why we charge higher interest rates on risker things!

as i said IT DISTORTS THE MARKET. I don't care about your company that needs to be saved. The fact is it WAS BADLY RUN, and perhaps...just maybe some of the staff and other stake holder groups have something to answer for as part of that.

in the process THEY DAMAGE OTHER MORE RESPONSIBLE COMPANIES and in the real free market, those companies should be the surviving entities. IE - after having gone through the blood bath competing with the irresponsible company their business should emerge as the survivor. And be able to then expand and fill the gap left by the badly run company. Think of it like economic darwinism.

[Edited 2012-11-18 14:46:05]

User currently onlinepar13del From Bahamas, joined Dec 2005, 6738 posts, RR: 8
Reply 7, posted (1 year 5 months 5 days 13 hours ago) and read 5320 times:

Quoting Lufthansa (Reply 6):
as i said IT DISTORTS THE MARKET. I don't care about your company that needs to be saved. The fact is it WAS BADLY RUN, and perhaps...just maybe some of the staff and other stake holder groups have something to answer for as part of that.

in the process THEY DAMAGE OTHER MORE RESPONSIBLE COMPANIES and in the real free market, those companies should be the surviving entities. IE - after having gone through the blood bath competing with the irresponsible company their business should emerge as the survivor. And be able to then expand and fill the gap left by the badly run company. Think of it like economic darwinism.

One can easily apply these principles to a number governments who today function as business houses, thankfully, they have the power to raise taxes when they choose to cover their bad decisions.
When jobs are in the balance they offer inducements for companies to stay in business, tax breaks to build factories and expand their tax bases, of course one can always say that every company that suffered under the Global Economic crisis were poorly run and governments the world over should have done nothing to force its citizens to patronize those companies business to keep them afloat, but we digress from the central theme.


User currently onlineBMI727 From United States of America, joined Feb 2009, 15499 posts, RR: 26
Reply 8, posted (1 year 5 months 5 days 13 hours ago) and read 5313 times:

Quoting Lufthansa (Reply 6):
READ WHAT I SAID.... the company, if run bad HAS NO RIGHT TO EXIST!

It has a right to exist if the creditors and investors allow it to. If a company loses a billion dollars per year, but investors pump in a billion dollars each year to cover it, then it has a right to exist. That's basically how Virgin America has worked since it started.

Quoting Lufthansa (Reply 6):
You extend credit to somebody who mismanages it, it's your bad luck. As a creditor you lose.

But, if you could work with a company while it's in bankruptcy so you might lose only a part of the loan, you'd do it. Of course, if you think the situation is so bad that you'll never get it back, you'll vote against the restructuring plan and get what you can in liquidation.

Quoting Lufthansa (Reply 6):
And be able to then expand and fill the gap left by the badly run company.

If creditors thought the struggling company was not salvageable, they'd deep six reorganziation and be more than happy to fund expansion of the competitors.



Why do Aerospace Engineering students have to turn things in on time?
User currently offlineflyingalex From Germany, joined Jul 2010, 1013 posts, RR: 0
Reply 9, posted (1 year 5 months 5 days 12 hours ago) and read 5314 times:

Quoting g500 (Thread starter):
What are the main differences of an airline going bankrupt in the U.S or Canada vs the E.U?? Everybody is talking about the "end being near for SAS" because they're close to bankruptcy.

Here in the U.S several majors have gone bankrupt (a couple twice), only to comeback leaner and stronger..

Unless I'm missing something, it seems like in the E.U declaring bankruptcy means your lenders are about to take everything you own and close the shop

The difference lies in the different bankruptcy laws in the US and in Europe.

In the US, there are two "kinds" of bankrupt, one under Chapter 7 and one under Chapter 11 of the bankruptcy code. The latter means you're given some time to try and fix things, and that you can renege on all sorts of agreements with your previous creditors (which is how a lot of US airlines managed to ditch their union contracts and pension liabilities). The former means your company gets liquidated.

European bankruptcy laws don't really provide a Chapter 11 equivalent. If you file for bankruptcy over here, your company is very likely finished. That doesn't mean that there won't be anyone who picks up the company's assets and continues the business, but the original entity is usually toast.



Public service announcement: "It's" = "it is". To indicate posession, write "its." Looks wrong, but it's correct grammar
User currently offlinetdscanuck From Canada, joined Jan 2006, 12709 posts, RR: 80
Reply 10, posted (1 year 5 months 5 days 11 hours ago) and read 5313 times:

Quoting Lufthansa (Reply 6):
READ WHAT I SAID.... the company, if run bad HAS NO RIGHT TO EXIST! it is a get out of jail free card. You extend credit to somebody who mismanages it, it's your bad luck. As a creditor you lose.

It's a "get-out-of-jail-with-a-hell-of-a-bail-and-probation-card." Calling it "free" is just misleading.

To get into Chapter 11 you need to convince your creditors you're worth more alive than dead and they (and the courts) can do pretty much whatever they want to you in the process. Chapter 11 is a huge loss, it's just (sometimes) a smaller loss than Chapter 7. If you're an economist, you know there's a huge inefficiency in the liquidation process itself...Chapter 11 is supposed to help alleviate some of that and recover more money that would otherwise be recoverable.

Tom.


User currently offlineCubsrule From United States of America, joined May 2004, 22319 posts, RR: 20
Reply 11, posted (1 year 5 months 5 days 9 hours ago) and read 5312 times:

Quoting Lufthansa (Reply 6):
You extend credit to somebody who mismanages it, it's your bad luck. As a creditor you lose. THAT is the free market,

Unsecured creditors lose in C11 and C7 (and C13, where it's not uncommon to see unsecureds getting 20 or 30 cents on the dollar).

Quoting Lufthansa (Reply 6):
as i said IT DISTORTS THE MARKET. I don't care about your company that needs to be saved.

I don't understand how C11 distorts the market more than C7. The general provisions for paying creditors are the same with the exception that in C11 there tends to be more money around because the company is still generating revenue and, generally, is something like operationally profitable or it would not be in C11.



I can't decide whether I miss the tulip or the bowling shoe more
User currently offlineLufthansa From Christmas Island, joined May 1999, 3197 posts, RR: 10
Reply 12, posted (1 year 5 months 5 days 4 hours ago) and read 5313 times:

Quoting BMI727 (Reply 8):
But, if you could work with a company while it's in bankruptcy so you might lose only a part of the loan, you'd do it. Of course, if you think the situation is so bad that you'll never get it back, you'll vote against the restructuring plan and get what you can in liquidation.

You're not looking at the effect on the entire market place, just the welfare of an exiting company and its stakeholders. The issue, when applying legal principles to the marketplace should have a greater emphasis on maintaining a level playing field than this if we are going for true free market principles.

Quoting BMI727 (Reply 8):
If creditors thought the struggling company was not salvageable, they'd deep six reorganziation and be more than happy to fund expansion of the competitors.

Well that's wrong. Plenty of banks have made huge huge money out of bankruptcy financing. They are the first creditor to be paid in such instances. The risk on their part is often minimal. And its often not that the creditors don't think a company is salvageable, it with change (read good management and practices instead of doing what got it into the mess in the first place) often can be. After all it usually has a huge revenue steam coming in, it just needs to be dealt with differently. That isn't once again the point. the point is, what about about all the other competitors these companies damaged in the process? If the company is really that good, well it wouldn't be in bankruptcy in the first place and it also probably would have been able to raise new capital more easily.

Quoting Cubsrule (Reply 11):
I don't understand how C11 distorts the market more than C7. The general provisions for paying creditors are the same with the exception that in C11 there tends to be more money around because the company is still generating revenue and, generally, is something like operationally profitable or it would not be in C11.

It's simple. While companies engage in desperate attempts to survive they do things like price for market share. It's a going for broke mentality. It fosters a culture within an organisation that basically says "we'll all still have jobs we'll just go through the bankruptcy" which leads more extreme positions from things like union demands. It also lets middle level managers get more cocky in their demands (the bankruptcy judge will just force you to agree with what I want eventually anyway mindset). While all this kind of thing is going on, better run carriers aren't making what they should be. They take on debt, aren't able to reinvest where they should etc, and they end up weaker than they should be as a result. There are very very good reasons most of the world does not allow these kinds of re-organisations. It's not because they are concerned about the welfare of individual companies. It's because they are concerned about the health of the entire marketplace above that of an individual company. To put it in layman's terms, its about maintaining a level playing field.


User currently offlines5daw From Slovenia, joined May 2011, 241 posts, RR: 0
Reply 13, posted (1 year 5 months 5 days 4 hours ago) and read 5309 times:

Quoting Lufthansa (Reply 3):
IT DISTORTS THE MARKET!

This is certainly an very interesting point of view, which makes sense to my layman mind.

But, consider this: there is much worse poison spreading in the EU, and it's called state aid.
Many European airlines received state aid or - what it really should be called - a bailout.
Some of the cases in point:
- Adria Airways
- Czech Airlines
- Malev (had to return it if memory serves well)
- SAS
- Air France
- Olympic
...

Now usually the reasoning behind state aid is very emotionally powered, at least in case of Adria which I can observe locally. "We save jobs, we keep the country connected to important destinations, blah blah blah."

In reality, keeping systems like some of those on life support just distorts the market and prevents competition from even showing up.

And it's far worse than chapter 11, where it's creditor's decision to throw good money after bad, as in case of state aid it's the tax payers who sponsor the aid, but have no real saying in it.

Of course, politics has their own interest in keeping the systems alive - which more or less is a guarantee for even more incompetent management, unnecessary job openings for friends etc. etc. In essence, most state aided systems are incubators of incompetence.


User currently onlineBMI727 From United States of America, joined Feb 2009, 15499 posts, RR: 26
Reply 14, posted (1 year 5 months 5 days 3 hours ago) and read 5311 times:

Quoting Lufthansa (Reply 12):
You're not looking at the effect on the entire market place, just the welfare of an exiting company and its stakeholders.

The only way for a company to get a second chance via Chapter 11 is for the stakeholders to agree to give it one. Should the government have forced Virgin America to shut down because they didn't turn a profit and existed on additional investment?

Investors choose to put their capital into a company and creditors choose to lend to them. If they want to go along with a restructuring plan to try and salvage a struggling business, that is also their choice. It's only unfair in that private entities choose to put their resources in one company versus another.

If competitor happens to have investors with deeper pockets, that's not unfairness the government should seek to curtail unless it's blatantly anti-competitive.

Quoting s5daw (Reply 13):
But, consider this: there is much worse poison spreading in the EU, and it's called state aid.
Many European airlines received state aid or - what it really should be called - a bailout.

State bailouts are a different animal, and something I am completely against. If you cannot succeed without government money, it means you cannot succeed.

Quoting s5daw (Reply 13):
And it's far worse than chapter 11, where it's creditor's decision to throw good money after bad, as in case of state aid it's the tax payers who sponsor the aid, but have no real saying in it.

For the taxpayers, if all of the current investors and creditors do not find the business worthy of their money, why should the taxpayers have their money put on the line instead? If you go to the casino, you play differently when you play with someone else's chips.

[Edited 2012-11-19 00:33:31]


Why do Aerospace Engineering students have to turn things in on time?
User currently offlineCubsrule From United States of America, joined May 2004, 22319 posts, RR: 20
Reply 15, posted (1 year 5 months 4 days 23 hours ago) and read 5307 times:

Quoting Lufthansa (Reply 12):
It fosters a culture within an organisation that basically says "we'll all still have jobs we'll just go through the bankruptcy" which leads more extreme positions from things like union demands.

Are you aware of any empirical evidence supporting this assertion? I am not.



I can't decide whether I miss the tulip or the bowling shoe more
User currently offlines5daw From Slovenia, joined May 2011, 241 posts, RR: 0
Reply 16, posted (1 year 5 months 4 days 22 hours ago) and read 5306 times:

Quoting Cubsrule (Reply 15):
Are you aware of any empirical evidence supporting this assertion?

Isn't SAS a point in case? Unions demanding the impossible to the point where operation is about to close?


User currently offlineCubsrule From United States of America, joined May 2004, 22319 posts, RR: 20
Reply 17, posted (1 year 5 months 4 days 22 hours ago) and read 5307 times:

Quoting s5daw (Reply 16):
Isn't SAS a point in case? Unions demanding the impossible to the point where operation is about to close?

And, alas, the European way is supposedly the one where that does not happen. That's sort of why I asked the question.



I can't decide whether I miss the tulip or the bowling shoe more
User currently offlines5daw From Slovenia, joined May 2011, 241 posts, RR: 0
Reply 18, posted (1 year 5 months 4 days 22 hours ago) and read 5306 times:

Quoting Cubsrule (Reply 17):
And, alas, the European way is supposedly the one where that does not happen. That's sort of why I asked the question.

Ah sorry, got the two mixed up.

Well, in general I think US still has far superior free market to EU or to anybody else for that matter, and that still makes US the superpower it is.

On the other hand, I'm not sure free market is really the best solution in all areas (e.g. healthcare), but that is a different story.


User currently offlinerfields5421 From United States of America, joined Jul 2007, 7348 posts, RR: 32
Reply 19, posted (1 year 5 months 4 days 22 hours ago) and read 5307 times:

Quoting BMI727 (Reply 14):
The only way for a company to get a second chance via Chapter 11 is for the stakeholders to agree to give it one.

And who exactly are the stakeholders? The people who have put their investment and retirement money into the company, or the people who have decided to make direct loans to the company?

The Ch 11 process in the US encourages company leaders - who are supposed to be employees - to manage their company and focus on creditors, not the nominal owners of the company - the stockholders.

The Ch 11 process dramatically increases our government debt and obligations as companies use it to shed obligations to their employees and foster them onto the American people.

The Ch 11 process has ended the concept of stockholders as owners of the company, and replaced it with large lenders as practical owners of the company.

Quoting Cubsrule (Reply 11):
I don't understand how C11 distorts the market more than C7. The general provisions for paying creditors are the same with the exception that in C11 there tends to be more money around because the company is still generating revenue and, generally, is something like operationally profitable or it would not be in C11.

Ch 11 in the US has become a management restructing tool. An acceptable method of shedding company responsibilities rather than actually making the company deal with its obligations.

In the US, Ch 11 is no longer a situation where a company is in dire financial condition, but an option for management to get out of their mistakes - and not be held responsible.


User currently offlineCubsrule From United States of America, joined May 2004, 22319 posts, RR: 20
Reply 20, posted (1 year 5 months 4 days 22 hours ago) and read 5307 times:

Quoting rfields5421 (Reply 19):
In the US, Ch 11 is no longer a situation where a company is in dire financial condition, but an option for management to get out of their mistakes - and not be held responsible.

But generally, the entry requirements are the same for C7 and C11, aren't they? So in this "C11-less" alternate universe that some are proposing, we'd see management using C7 for the same purposes and creditors winding up getting paid even less.



I can't decide whether I miss the tulip or the bowling shoe more
User currently offlinePITingres From United States of America, joined Dec 2007, 1089 posts, RR: 13
Reply 21, posted (1 year 5 months 4 days 21 hours ago) and read 5306 times:

Quoting Lufthansa (Reply 12):
You're not looking at the effect on the entire market place, just the welfare of an exiting company and its stakeholders.

Sure, let's look at the *entire* market place, then. If there is no CH11 or equivalent, then instead of a reorganization, United (let's say, just for example) goes bust. That will pretty quickly vaporise a whole slew of their suppliers, in turn breaking some of the second level suppliers, and so on. To say that these secondary businesses should fail just because United's management made some bad decisions seems pretty unfair to me. Corporations are not abstract concepts, nor are they a few managers, they are people and they exist in a web of other corporations and people.

I don't know if the US style CH11 is generally a good way to do things or generally a bad way to do things, and since I have real work to do today   I can't be arsed to worry about it right now. I do think that treating the problem in simplistic, black-and-white, abstract terms will definitely get you to the wrong answer.



Fly, you fools! Fly!
User currently offlinebreiz From France, joined Mar 2005, 1893 posts, RR: 2
Reply 22, posted (1 year 5 months 4 days 21 hours ago) and read 5307 times:

Quoting s5daw (Reply 13):
there is much worse poison spreading in the EU, and it's called state aid

That's a recurring argument.
In Europe, or elsewhere, states inject capital in ailing airlines because they are shareholders.
It is the duty of the shareholders to bring fresh capital when required, or to pull the plug.
Of course, depending where you look from, states may not be accepted as normal shareholders.


User currently offlinerfields5421 From United States of America, joined Jul 2007, 7348 posts, RR: 32
Reply 23, posted (1 year 5 months 4 days 20 hours ago) and read 5308 times:

Quoting Cubsrule (Reply 20):
But generally, the entry requirements are the same for C7 and C11, aren't they?

Not in practice in the US today.

For example - AMR filed for Ch 11 having substantial operational cash on hand, having previously arranged aircraft lease revisions, etc. AMR was not close to insolvency or having to shut down.

AMR would not have been allowed to file Ch 7 in that financial condition unless they could prove that the airline was going to be insolvent very soon.

A Ch 7 bankruptcy for companies is only filed when the company is near having no cash on hand.

Some Ch 11 bankruptcies for companies are later converted to Ch 7 and the company liquidated.

But in the airline industry in the US Ch 11 has simply become a tool for management to break 'bad' contracts they had agreed to previously. It is also used as a tactic to break union contracts.

The big difference is that in filing Ch 11 - the current management usually stays in place, where in filing Ch 7 - the current managment is very soon shown the door - without their separation bonuses, etc.

In Ch 7 the management will get the same shaft for pension, medical care, etc as the hourly workers. Under Ch 11, management retains their retirement bonuses, separation bonuses, incentive pay, etc - while the hourly workers get much less proportionally.


User currently offlinebrilondon From Canada, joined Aug 2005, 4059 posts, RR: 1
Reply 24, posted (1 year 5 months 4 days 20 hours ago) and read 5308 times:

Quoting Lufthansa (Reply 6):
READ WHAT I SAID.... the company, if run bad HAS NO RIGHT TO EXIST! it is a get out of jail free card. You extend credit to somebody who mismanages it, it's your bad luck. As a creditor you lose. THAT is the free market, and that is why we charge higher interest rates on risker things!

I have read your ramblings and by doing so, you don't seem to have a grasp of what bankruptcy means in the US. There are different types of bankruptcy: There is the bankruptcy where you have no more money to cover your current operating expenses and have no more means of financing and have to shut down because you have no more money and no one will lend you any more. There is also the bankruptcy where you can still cover your current operating expenses but have no money left for you long term obligations such as loan repayments, pension funding, supplier payments and other long term obligations. This is what most airlines have filed for, to reorganize their obligations.

In Canada there is bankruptcy and then there is an instrument where by companies can reorganize their obligations and negotiate more favourable terms to help them through the cash shortage. It use to be called the CCRA but it has been updated and the name has changed.



Rush for ever; Yankees all the way!!
User currently offlinetdscanuck From Canada, joined Jan 2006, 12709 posts, RR: 80
Reply 25, posted (1 year 5 months 4 days 20 hours ago) and read 5455 times:

Quoting Lufthansa (Reply 12):
The issue, when applying legal principles to the marketplace should have a greater emphasis on maintaining a level playing field than this if we are going for true free market principles.

How is it not a level playing field when all companies are operating under the same law?

Now, if you're talking about international competitors I agree it's not a level playing field but the bankrupcy laws are hardly the gorilla in the room for that...let's see open skies treaties first before we squawk about an unlevel playing field due to bankrupcy laws.

Tom.


User currently offlineCubsrule From United States of America, joined May 2004, 22319 posts, RR: 20
Reply 26, posted (1 year 5 months 4 days 20 hours ago) and read 5441 times:

Quoting rfields5421 (Reply 23):
Not in practice in the US today.

If you read the code, you will find that cash on hand has nothing to do with the definition of insolvency (and thus the ability to seek protection).



I can't decide whether I miss the tulip or the bowling shoe more
User currently onlineBMI727 From United States of America, joined Feb 2009, 15499 posts, RR: 26
Reply 27, posted (1 year 5 months 4 days 17 hours ago) and read 5466 times:

Quoting rfields5421 (Reply 19):
The people who have put their investment and retirement money into the company, or the people who have decided to make direct loans to the company?

Both. Of course if you're in bankruptcy, the first group is probably already in distress.

Quoting rfields5421 (Reply 19):
The Ch 11 process has ended the concept of stockholders as owners of the company, and replaced it with large lenders as practical owners of the company.

In some cases there's truth to that. But if you're in a position of losing money and possibly being unable to pay debts, you are going to beholden to the creditors.

Quoting breiz (Reply 22):
Of course, depending where you look from, states may not be accepted as normal shareholders.

I'd say that having states as shareholders is usually a pretty poor idea.

Quoting brilondon (Reply 24):
There is also the bankruptcy where you can still cover your current operating expenses but have no money left for you long term obligations such as loan repayments, pension funding, supplier payments and other long term obligations. This is what most airlines have filed for, to reorganize their obligations.

   If the situation is bad, stop and fix it before it gets worse.



Why do Aerospace Engineering students have to turn things in on time?
User currently offlineredflyer From United States of America, joined Feb 2005, 4252 posts, RR: 29
Reply 28, posted (1 year 5 months 4 days 15 hours ago) and read 5451 times:

Quoting BMI727 (Reply 14):
Quoting Lufthansa (Reply 12):
You're not looking at the effect on the entire market place, just the welfare of an exiting company and its stakeholders.

The only way for a company to get a second chance via Chapter 11 is for the stakeholders to agree to give it one.

The "stakeholders" are usually secured creditors. The investors usually have a secured stake in the organization, and Chapter 11 is geared towards allowing those stakeholders the latitude to keep the ailing organization alive so that they can recoup their losses. But in all of this no one ever addresses the interests of the unsecured creditors, which are often times (not always) the smaller entities that will incur a huge financial impact when their outstanding invoices (pre-BK) go unpaid and wipe them out. The secured creditors tend to be of the institutional variety and can usually weather the loss of their investment in the ailing organization. But no one ever thinks about the small unsecured creditors who are wiped out, or left in a lurch for many years while they recover. This is where the BK laws come up short.

Quoting rfields5421 (Reply 19):
Ch 11 in the US has become a management restructing tool. An acceptable method of shedding company responsibilities rather than actually making the company deal with its obligations.

Or deal with the consequences of its past (bad) decisions.

Quoting Cubsrule (Reply 20):
So in this "C11-less" alternate universe that some are proposing, we'd see management using C7 for the same purposes and creditors winding up getting paid even less.

Investors, by their nature, are risk takers. They invest in something knowing that the terms of the risks associated with that investment dictate they will recognize a windfall relative to other forms of capital building methodologies available to them. There is nothing wrong with stipulating that one of those risks entails losing the entire investment via Chapter 7 BK. If Chapter 7 were the only BK path available to an ailing organization then those investors would not be SOL, they would have simply structured the terms of their investment on the front end through a contractual stipulation - e.g., requiring the borrower/organization to always maintain a minimum cash position or debt ratio. Because of the availability of Chapter 11, secured creditors tend to be far more lax with their investment than they otherwise would be and take risks that they might otherwise not have. I'm not saying they are completely okay with the availability of Chapter 11 - BK is painful no matter what the path taken - but it certainly mitigates the risks to a certain point.



I'm not a racist...I hate Biden, too.
User currently offlinemayor From United States of America, joined Mar 2008, 9978 posts, RR: 14
Reply 29, posted (1 year 5 months 4 days 15 hours ago) and read 5449 times:

Quoting Lufthansa (Reply 12):
It fosters a culture within an organisation that basically says "we'll all still have jobs we'll just go through the bankruptcy" which leads more extreme positions from things like union demands.

Well, there's a crock if I ever heard one. You might want to ask some airline employees that have gone thru bankruptcy and see what their take on this is. I doubt if you're going to get many that have that attitude.

In addition to that, let me ask you this......how does your theory hold up in DL's bankruptcy, being largely non-union? Nobody likes to see their company on the brink of folding or massive job losses.

BTW, DL got themselves in BK trouble, for the most part, because they were chasing market share BEFORE they ever filed for bankruptcy.



"A committee is a group of the unprepared, appointed by the unwilling, to do the unnecessary"----Fred Allen
User currently offlineUALWN From Andorra, joined Jun 2009, 2671 posts, RR: 2
Reply 30, posted (1 year 5 months 4 days 14 hours ago) and read 5450 times:

Quoting rfields5421 (Reply 19):

Great post overall. Chapter 11 is indeed a get-out-of-jail card. It is free for management, and far from it for salaried workers, whose contracts get voided, or for shareholders.

Quoting rfields5421 (Reply 19):
The Ch 11 process dramatically increases our government debt and obligations as companies use it to shed obligations to their employees and foster them onto the American people.

Which is nothing but state aid...



AT7/111/146/Avro/CRJ/CR9/EMB/ERJ/E75/F50/100/L15/DC9/D10/M8X/717/727/737/747/757/767/777/AB6/310/319/320/321/330/340/380
User currently offlineLufthansa From Christmas Island, joined May 1999, 3197 posts, RR: 10
Reply 31, posted (1 year 5 months 4 days 13 hours ago) and read 5446 times:

Quoting mayor (Reply 29):
Well, there's a crock if I ever heard one. You might want to ask some airline employees that have gone thru bankruptcy and see what their take on this is. I doubt if you're going to get many that have that attitude.

People working frontline jobs obviously wouldn't be thinking like this. But most of those people aren't aware of how fine the margins are on plenty of day to day activities, they are, after all, doing their job in an organisation and aren't primarily business people. Some of those jobs are highly skilled. Others are merely cleaning the bathrooms, but, they are all primarily focused on their job. Their union leaders are different. They only have a job while their members are still employed but they can of course play hard ball. And some of them do, knowing their will be some kind of 'recapitalisation'.
Likewise, Some management don't sit down and talk when they should, knowing if they can get out of their contracts in the bankruptcy process, they can stick it to that union leader. End of story.

This isn't an ideal situation. Both groups should be sitting down and trying to strike a sustainable deal and focus on the company's long term health.

Quoting tdscanuck (Reply 25):
How is it not a level playing field when all companies are operating under the same law?

It's the distortion of the market. Let's take two fictional carriers based at ORD. Say Airline A and Airline B. Both have a huge hub operation. A is a tight run ship, has good industrial relations, values its people and pays them fairly. B pays its people more, is a slightly larger carrier with a turbulent history, has higher costs through its work practices both in terms of staffing per aircraft, turn around times, fleet utilisation practices but has traditionally been the business person's favourite. B see's A growing and doesn't like it, but because A is well run, its got better profit margins. Carrier A is growing at a slow and sustainable rate. B see's that and says enough is enough, draws a line in the sand, and doubles frequency on A's key routes. This has the unwanted effect of driving down yields by capacity dumping. Carrier A of course responds. It's worked hard to build up its routes. Yields go down to nothing. A increases its advertising spend, improves its lounges and takes on debt to do so. B has started pricing A's routes below cost, in an attempt to force them out of the market, but in doing so is losing more cash than A per flight as its costs are higher, but, It is subsidising this route from its flight to London which A does not have and B enjoys very good yields on. So B sustains the losses on this route for several years. A has managed to keep some of its market, but had to invest heavily in product upgrades at a time it wasn't making any money on the route which meant debt. This goes on for years. All of a sudden, B's staff point out they haven't had a pay rise in a few years. B's union leaders are determined to push for one. They start their campaign. B's management have absolutely zero intention of giving them one, pointing out they're already making a loss on the route, but they need to keep it for strategic reasons as they will lose a key frequent flyer base. B's staff threaten industrial action and effectively do get what they were asking for. Forcing B's cost differential up even further than A's. The game continues. Two new things happen. Oil prices creep up, and B finds a new British Airline competing with it on its london route. The key source of revenue allowing it to subsidise its fight with A.
A once again works hard with its staff, gets them to agree to a modest pay increase but explains at this point, this is all they can give as the situation has become extreme, however they know for a fact losses at B are far bigger so the market must change soon. They do. B runs out of cash.

So we get to the point where B runs out of cash. What should happen now? In a normal free market, if B can't find somebody to pump more money into it (unlikely if its making heavy losses) Then B can't refuel its plans, but A is still flying, albeit having taken on considerable debt to do so. B Stops flying, A then rapidly fills the gap by increasing its services and its yields immediately improve. They can' only improve so far, otherwise carrier C will set up down in shop. A is able to buy some of B's aircraft in a hurry, enabling them to expand. They even give some of their staff jobs. A is now the primary carrier there, and is now paying down its debt and enjoying healthy sustainable yeilds and its staff are onside. B is part of history. Lot's of B's former staff are working now at A. it took some adjusting, but they are now working at a financially sound entity, and one that is strong in its market, as the now dominate player. New carrier D is a LCC and comes along in a small presence, keeping prices in check but carrier A controls the majority of the market.

This is how a free market should work.

Or B gets "reorganised" in Chap 11. (obviously this happens before it runs out of cash but its well on the way)
It stays in the market place. It's staff have a put cut forced upon them, worse than what those over at A are on. They are naturally disgruntled. A is still barely making any money, but taking on debt in an attempt to keep its market. B however now has some of its price issues under control, but yields are still trash. The blood bath continues, except this time, now B now has an ability to stick it back to A. A has tried its best to engage in sustainable practices, but, B, now it has lower costs is dropping prices and winning back market share. A Starts to lose money and can now no longer take on debt for product upgrades. A starts to look tired, not as good as it once was, it needs to raise prices to compete, but if it does that B will take the market. A is left heavily indebted and making loses.. and it's time for Chap 11 for itself.

See the pattern? These laws stop the equilibrium that would naturally happen as part of the free market happening.


User currently onlineBMI727 From United States of America, joined Feb 2009, 15499 posts, RR: 26
Reply 32, posted (1 year 5 months 4 days 12 hours ago) and read 5441 times:

Quoting redflyer (Reply 28):
But in all of this no one ever addresses the interests of the unsecured creditors, which are often times (not always) the smaller entities that will incur a huge financial impact when their outstanding invoices (pre-BK) go unpaid and wipe them out.

Of course, in such a case, they end up no differently than they would in a liquidation.

Quoting redflyer (Reply 28):
There is nothing wrong with stipulating that one of those risks entails losing the entire investment via Chapter 7 BK.

That risk exists. That's exactly what happens if you cannot come up with a viable plan for reorganization.

Chapter 11 does not in any way keep companies from failing. If that's the intent, it's a massive failure. It gives the chance for the private entities involved with the business to fix problems before it truly fails, which sometimes succeeds and sometimes doesn't.

Quoting mayor (Reply 29):
Well, there's a crock if I ever heard one. You might want to ask some airline employees that have gone thru bankruptcy and see what their take on this is. I doubt if you're going to get many that have that attitude.

Certainly not, but bankruptcy proceedings usually leave them better off than the alternative.

Quoting Lufthansa (Reply 31):
See the pattern?

Yeah, airline A is dumb for not realizing that the market is price driven rather than product driven and sunk a bunch of money into upgrades that rather than bringing costs into line to compete more effectively. That's basically the story of the American airline industry post 1978 and especially post 2000 or so. How much money did AA burn through trying to compete without bringing their costs down?



Why do Aerospace Engineering students have to turn things in on time?
User currently offlineLufthansa From Christmas Island, joined May 1999, 3197 posts, RR: 10
Reply 33, posted (1 year 5 months 4 days 11 hours ago) and read 5436 times:

Thank you! You have just proven my point, the market hasn't been allowed to reach equilibrium. Hence why the cycle goes on. This is how it distorts the market.

User currently offlinebrilondon From Canada, joined Aug 2005, 4059 posts, RR: 1
Reply 34, posted (1 year 5 months 4 days 11 hours ago) and read 5439 times:

Quoting brilondon (Reply 24):
In Canada there is bankruptcy and then there is an instrument where by companies can reorganize their obligations and negotiate more favourable terms to help them through the cash shortage. It use to be called the CCRA but it has been updated and the name has changed.

OK, I am back. The instrument I was thinking about is the Bankruptcy and Insolvency Act which is similar to the Chapter 11 Bankruptcy.



Rush for ever; Yankees all the way!!
User currently offline9252fly From Canada, joined Sep 2005, 1381 posts, RR: 0
Reply 35, posted (1 year 5 months 4 days 7 hours ago) and read 5430 times:

Quoting brilondon (Reply 24):
It use to be called the CCRA but it has been updated and the name has changed.

I believe it's called CCAA, or Company Creditors Arrangement Act.


User currently offlinemayor From United States of America, joined Mar 2008, 9978 posts, RR: 14
Reply 36, posted (1 year 5 months 4 days 6 hours ago) and read 5429 times:

Considering that we're talking about bankruptcy in the U.S., how has any of the majors filing bankruptcy affected, negatively, any of the other majors, especially considering that they've ALL filed at one time or another, except WN and considering that they're making money, hand over fist, I don't believe it's affecting them, either.


HOW has the ability to file Chapter 11, in the U.S. affected the other airlines in the U.S.? Don't forget, they've ALL done it, now.......not counting B6, AS, NK, VX, etc.



"A committee is a group of the unprepared, appointed by the unwilling, to do the unnecessary"----Fred Allen
User currently offlinempdpilot From United States of America, joined Jul 2006, 986 posts, RR: 0
Reply 37, posted (1 year 5 months 4 days 5 hours ago) and read 5429 times:

Quoting Lufthansa (Reply 31):

Very good explanation of how the market works. However, explain how the chapter 11 changes things? The equilibrium that you describe occurs both with Chapter 11 and without it. in your first senario there are thousands of employees that loose their jobs. In the second senario there are more employees yes but instead of loosing their jobs they simply take a pay cut.

Second, how would you have brought costs inline with unions at your company?

Quoting rfields5421 (Reply 19):
The Ch 11 process dramatically increases our government debt and obligations as companies use it to shed obligations to their employees and foster them onto the American people.

Explain how any federal government debt is increased by Chapter 11 fillings of a corporation.



One mile of highway gets you one mile, one mile of runway gets you anywhere.
User currently onlineBMI727 From United States of America, joined Feb 2009, 15499 posts, RR: 26
Reply 38, posted (1 year 5 months 4 days 4 hours ago) and read 5428 times:

Quoting Lufthansa (Reply 33):
You have just proven my point, the market hasn't been allowed to reach equilibrium.

The only equilibrium the airline market ever had was the artificial one created by government regulation prior to 1978.



Why do Aerospace Engineering students have to turn things in on time?
User currently offlinerfields5421 From United States of America, joined Jul 2007, 7348 posts, RR: 32
Reply 39, posted (1 year 5 months 3 days 23 hours ago) and read 5416 times:

Quoting mpdpilot (Reply 37):
Explain how any federal government debt is increased by Chapter 11 fillings of a corporation.

Fees and such owed to the federal government by the airline are unsecured debts, which have been written off in the recent airline bankruptcies.

Airline employees who lose their jobs are eligible for federally funded extended unemployment benefits.

Airline employees who lose their jobs may qualify for federally funded job retaining programs.

Airline employees who lose their jobs often qualify for food stamps after primary separation benefits run out.

Airline employees who lose their jobs and/or medical insurance can qualify for Medicaid if they have children. Even if they do not, they join the uninsured pool, which is a big drain on local, state and federal government which have to fund ER care at public hospitals across the nation.

Airline pensions which are turned over to the Pension Benefit Guaranty Board have never been fully funded at the reduced levels. The PBGB obligations to pay out are near the level of the obligations to pay out Social Security, with substantially fewer assets to fund those payments. The US taxpayers are responsible for any payments the PBGB cannot fund from assumed pension plans and contributions from participating companies.


User currently offlinebrilondon From Canada, joined Aug 2005, 4059 posts, RR: 1
Reply 40, posted (1 year 5 months 3 days 22 hours ago) and read 5418 times:

Quoting 9252fly (Reply 35):
I believe it's called CCAA, or Company Creditors Arrangement Act.

Yeah, that's the one. Thanks. I was also thinking about the Bankruptcy and Insolvency act which is similar to Chapter 7 in the US.



Rush for ever; Yankees all the way!!
User currently offlinetdscanuck From Canada, joined Jan 2006, 12709 posts, RR: 80
Reply 41, posted (1 year 5 months 3 days 22 hours ago) and read 5428 times:

Quoting mayor (Reply 36):
Considering that we're talking about bankruptcy in the U.S., how has any of the majors filing bankruptcy affected, negatively, any of the other majors, especially considering that they've ALL filed at one time or another, except WN and considering that they're making money, hand over fist, I don't believe it's affecting them, either.

The argument is that if some of the majors had gone through Ch 7, rather than Ch 11, the surviving carriers wouldn't have also been forced into Ch 11. In the case of WN, the argument (probably true) is that they would have made a lot more money without competing with carriers protected by Ch 11, enabling them to grow more and displace less efficient carriers from the market.

Quoting rfields5421 (Reply 39):
Fees and such owed to the federal government by the airline are unsecured debts, which have been written off in the recent airline bankruptcies.

That gets worse under Ch 7, not better. Ch 11 gives them a fighting chance to repay at least some of those debts.

Quoting rfields5421 (Reply 39):
Airline employees who lose their jobs are eligible for federally funded extended unemployment benefits.

Airline employees who lose their jobs may qualify for federally funded job retaining programs.

Airline employees who lose their jobs often qualify for food stamps after primary separation benefits run out.

Airline employees who lose their jobs and/or medical insurance can qualify for Medicaid if they have children.

Airline employees would be eligible for all these benefits under any job loss, whether Ch 7 or 11. Ch 11 lays *less* people off, resulting in *less* federal government obligation under the above programs, not more.

Tom.


User currently onlineBongodog1964 From United Kingdom, joined Oct 2006, 3475 posts, RR: 3
Reply 42, posted (1 year 5 months 3 days 20 hours ago) and read 5417 times:

Quoting flyingalex (Reply 9):
The difference lies in the different bankruptcy laws in the US and in Europe.

In the US, there are two "kinds" of bankrupt, one under Chapter 7 and one under Chapter 11 of the bankruptcy code. The latter means you're given some time to try and fix things, and that you can renege on all sorts of agreements with your previous creditors (which is how a lot of US airlines managed to ditch their union contracts and pension liabilities). The former means your company gets liquidated.

European bankruptcy laws don't really provide a Chapter 11 equivalent. If you file for bankruptcy over here, your company is very likely finished. That doesn't mean that there won't be anyone who picks up the company's assets and continues the business, but the original entity is usually toast.

I can't speak for the rest of Europe, but here in the UK there are usually four routes for a company in trouble:

The 1st is a "Company Voluntary Arrangement" (CVA) With a CVA all the creditors are offered a deal where they get a % of their debts paid, either immediately or in stages. This has to be agreed by a very high percentage of the creditors in order to proceed. The advantage for both parties is that the company continues to trade and the creditors have a firm idea of what they will be getting, plus there's no huge fees from the accountants for closing the business down and lossed from selling stock for silly money.

The 2nd is called a "pre pack" The owners set up a new company often with a similar name to the existing one, reach an agreement with a firm of insolvency experts to buy the good assets from the existing failing company, then when its all agreed they send the 1st company into administration, the insolvency people sell them the good bits for a fee which coverts their expenses, and the they write and tell the creditors "there's nothing left for you"
Usually in these cases, the company continues to run from the same premises, with the same staff, same vehicles, same computers etc. As an example you could supply them with a new phone system which they don't pay for. When you ring them up to ask for the money, they answer on your phone and tell you that they've bought it for pennies from the liquidator, and tell you to take a running jump.

This option really is a cynical way to do business and IMO should be outlawed.

The 3rd is administration, the insolvency experts take control of the business, continue to run it, maybe shutting down hopeless parts and sell off the remainder, shareholders are wiped out, creditors get whats left after the administrators and the secured creditors take whats owed to them.

The 4th is bankruptcy, its all shut down and sold off. As long as the insolvency people cover their fees they don't seem care too much about anyone else, most business people seem to have stories of bankruptcys where the insolvency people either totally lost assets or sold them off too cheaply.

Thus you can see that we do have schemes similar to Ch 11, its just that they are not called bankruptcy.

The equivalant of Ch11 is probably less prevalent here in the UK than the US as companies don't generraly have the crippling health care costs and such like that burden many long standing US businesses, who can find that Ch11 is the only way to get labour costs to a competitive level.

Presently in the UK we are seeing a lot of shop chains heading down the equivalant of Ch11, they are burdened by high rents for shops which they signed at the top of the market so the solution is administration and then tell the landlords, "you either take a reduced rent or we surrender the lease".


User currently offlineredflyer From United States of America, joined Feb 2005, 4252 posts, RR: 29
Reply 43, posted (1 year 5 months 3 days 20 hours ago) and read 5417 times:

Quoting BMI727 (Reply 32):
Quoting redflyer (Reply 28):
There is nothing wrong with stipulating that one of those risks entails losing the entire investment via Chapter 7 BK.

That risk exists. That's exactly what happens if you cannot come up with a viable plan for reorganization.
Quoting BMI727 (Reply 32):
Chapter 11 does not in any way keep companies from failing. If that's the intent, it's a massive failure. It gives the chance for the private entities involved with the business to fix problems before it truly fails, which sometimes succeeds and sometimes doesn't.

But the whole point of Chapter 11 is to "protect" the defaulting organization long enough to see if it can come up with a viable plan. Unfortunately - and my whole argument around this - is that it protects the organization in an artificial manner. It would be better, in my opinion, to let the organization default and go into liquidation. That way every entity that is impacted, from suppliers to creditors, would be treated the same. Chapter 11 does create a distortion by making some entities bear the brunt as if the defaulting organization had in fact gone into Chapter 7 whereas other entities get a shot at redemption.

Allowing for liquidation is not a bad thing. In a free market system nothing ever really goes away...it just gets redistributed and becomes more efficient in the process. Look at every company that has liquidated. Its assets are acquired by other companies and put to good use. A large portion of the work force is also acquired as well as part of those assets in order to run them. The only thing that truly goes away is the brand. In the case of airlines, if you look at some of the ones that went into CH 7, what happened to the assets and the people? They got picked up by other carriers. It's not as if someone came through with a blowtorch and burned everything to the ground.  
Quoting mayor (Reply 36):
Considering that we're talking about bankruptcy in the U.S., how has any of the majors filing bankruptcy affected, negatively, any of the other majors, especially considering that they've ALL filed at one time or another, except WN and considering that they're making money, hand over fist, I don't believe it's affecting them, either.


HOW has the ability to file Chapter 11, in the U.S. affected the other airlines in the U.S.? Don't forget, they've ALL done it, now.......not counting B6, AS, NK, VX, etc.

As far as the major carriers are concerned, as soon as one went into BK protection, then it got a leg up on the competition. By way of example, when UA went into BK back in the early 2000's, when it emerged it was far leaner and more profitable because it was allowed to shed its liabilities, which were driving its high costs pre-BK. That put pressure on the other majors because they were now at a disadvantage. Eventually they followed suit. AA was the last one and if you had read what analysts were saying in the few years prior to its BK filing in 2011, they were all saying that it had to go through BK in order to stay competitive. Mind you, they weren't saying it had to go through BK because it just couldn't stay afloat financially. They were saying it had to go through BK in order to stay competitive.

So, to Lufthansa's point in his posts, above, it does create a distortion. It is a means to legally breach contractual obligations in order to shed debt and become more competitive. Once that is done, if there are competitors that were in the same situation then they suddenly have a disadvantage. Why? Because a court of law ordered that the ailing organization could walk away from its debt obligations.

Is that fair?

I could be wrong, but in all of the posts on this thread I haven't seen anyone address what the harm is that would occur if all BK filings were required to result in liquidation. Maybe that would be a more interesting topic of discussion!



I'm not a racist...I hate Biden, too.
User currently offlineripcordd From United States of America, joined Apr 2000, 1126 posts, RR: 1
Reply 44, posted (1 year 5 months 3 days 20 hours ago) and read 5419 times:

Quoting Lufthansa (Reply 3):

Here is the problem AA is now going against DL which you call a well run company but they got that way thru BK, UA, and US to lesser extent all of which is their major competitors all went thru BK came out with less debt, wages below AA so how can you compete with them you have to go thru BK to lower your costs down.


User currently offlinemayor From United States of America, joined Mar 2008, 9978 posts, RR: 14
Reply 45, posted (1 year 5 months 3 days 20 hours ago) and read 5413 times:

Quoting redflyer (Reply 43):
It would be better, in my opinion, to let the organization default and go into liquidation. That way every entity that is impacted, from suppliers to creditors, would be treated the same.

EVERY entity? Are the employees not impacted?

Quoting redflyer (Reply 43):
I could be wrong, but in all of the posts on this thread I haven't seen anyone address what the harm is that would occur if all BK filings were required to result in liquidation. Maybe that would be a more interesting topic of discussion!

The harm is what you've done to the employees you just put out of a job? Say, for instance, that DL was to go into liquidation. The pilots would probably either retire or try to hire on somewhere else (considering the pilot shortage), but all the others would have to try to hire on at other carriers (IF there were openings) or find work in some other industry. There's just not room out there for another 80,000 people, all of a sudden.

Even when PanAm went into liquidation, only part of their employees went over to DL when they acquired SOME of the assets. When Eastern folded, I'm sure some of them ended up at DL and other carriers, but that's just from them hiring on, there.



"A committee is a group of the unprepared, appointed by the unwilling, to do the unnecessary"----Fred Allen
User currently offlineredflyer From United States of America, joined Feb 2005, 4252 posts, RR: 29
Reply 46, posted (1 year 5 months 3 days 19 hours ago) and read 5405 times:

Quoting mayor (Reply 45):
Quoting redflyer (Reply 43):
It would be better, in my opinion, to let the organization default and go into liquidation. That way every entity that is impacted, from suppliers to creditors, would be treated the same.

EVERY entity? Are the employees not impacted?

Of course employees are impacted. But, believe it or not, they probably fare better than creditors and suppliers do. Employees will find work with other carriers/companies with minimal impact (relatively speaking - I am NOT diminishing the emotional toll these things will take). Usually in a BK liquidation the employees will find work with other organizations, often times the very ones that pick up the liquidated organization's assets and/or market share.

Quoting mayor (Reply 45):
Quoting redflyer (Reply 43):
I could be wrong, but in all of the posts on this thread I haven't seen anyone address what the harm is that would occur if all BK filings were required to result in liquidation. Maybe that would be a more interesting topic of discussion!

The harm is what you've done to the employees you just put out of a job? Say, for instance, that DL was to go into liquidation. The pilots would probably either retire or try to hire on somewhere else (considering the pilot shortage), but all the others would have to try to hire on at other carriers (IF there were openings) or find work in some other industry. There's just not room out there for another 80,000 people, all of a sudden.

They are out of a job only for the liquidated organization. The organization(s) that pick up the liquidated company's assets and/or market share will usually pick up the employees as well. If the market is there, they WILL find employment in the same industry. If the market is NOT there, well then, that just goes to show the impracticality of propping up an ailing company. And if you guarantee employment in a non-existent market then that is not a free market system.

In a free market system everything should be able to stand financially on its own merits. Any mechanism that protects an organization from the winds and shifting tides of the market is only distorting that market.



I'm not a racist...I hate Biden, too.
User currently offlineUALWN From Andorra, joined Jun 2009, 2671 posts, RR: 2
Reply 47, posted (1 year 5 months 3 days 19 hours ago) and read 5404 times:

Quoting tdscanuck (Reply 41):
Airline employees would be eligible for all these benefits under any job loss, whether Ch 7 or 11. Ch 11 lays *less* people off, resulting in *less* federal government obligation under the above programs, not more.

The difference is that under Chapter 7 the management who run the company into the ground lose their jobs, their severance pay, their health insurance, etc. just like everybody else. While with Chapter 11, those same people who run the company into the ground conserve pay, benefits, bonuses and what not, while everybody else (lower employees, shareholders, creditors and tax payers) share the pain.

Also under Chapter 7, a company badly run disappears, and only the fittest companies survive. Under Chapter 11, however, the weaklings return having shed a ton of liability, and ready to start back again with an unfair competitive advantage with respect to those companies that pay off all their debts, thereby preventing evolution from performing its magic...



AT7/111/146/Avro/CRJ/CR9/EMB/ERJ/E75/F50/100/L15/DC9/D10/M8X/717/727/737/747/757/767/777/AB6/310/319/320/321/330/340/380
User currently offlinetdscanuck From Canada, joined Jan 2006, 12709 posts, RR: 80
Reply 48, posted (1 year 5 months 3 days 18 hours ago) and read 5407 times:

Quoting UALWN (Reply 47):
The difference is that under Chapter 7 the management who run the company into the ground lose their jobs, their severance pay, their health insurance, etc. just like everybody else. While with Chapter 11, those same people who run the company into the ground conserve pay, benefits, bonuses and what not, while everybody else (lower employees, shareholders, creditors and tax payers) share the pain.

I've never heard of any Ch.11 where management took *no* hit. If nothing else, especially in the US, upper management holds a lot of stock and stock options, which is typically rendered worthless during the Ch. 11 process.

And the share of pain under Ch.11 for "everyone else" is at least less pain than under Ch. 7.

The undertone seems to be that you don't like how management comes through Ch. 11, not the concept itself. Is that the core issue?

Tom.


User currently offlineUALWN From Andorra, joined Jun 2009, 2671 posts, RR: 2
Reply 49, posted (1 year 5 months 3 days 18 hours ago) and read 5403 times:

Quoting tdscanuck (Reply 48):
The undertone seems to be that you don't like how management comes through Ch. 11, not the concept itself. Is that the core issue?

This is one of them. But see also my second paragraph above, about the unfair competitive advantage afforded to those companies who are allowed to come back after Ch. 11.



AT7/111/146/Avro/CRJ/CR9/EMB/ERJ/E75/F50/100/L15/DC9/D10/M8X/717/727/737/747/757/767/777/AB6/310/319/320/321/330/340/380
User currently offlinemayor From United States of America, joined Mar 2008, 9978 posts, RR: 14
Reply 50, posted (1 year 5 months 3 days 18 hours ago) and read 5400 times:

Quoting redflyer (Reply 46):
Of course employees are impacted. But, believe it or not, they probably fare better than creditors and suppliers do. Employees will find work with other carriers/companies with minimal impact (relatively speaking - I am NOT diminishing the emotional toll these things will take). Usually in a BK liquidation the employees will find work with other organizations, often times the very ones that pick up the liquidated organization's assets and/or market share.
Quoting redflyer (Reply 46):
They are out of a job only for the liquidated organization. The organization(s) that pick up the liquidated company's assets and/or market share will usually pick up the employees as well. If the market is there, they WILL find employment in the same industry. If the market is NOT there, well then, that just goes to show the impracticality of propping up an ailing company. And if you guarantee employment in a non-existent market then that is not a free market system.

Obviously, you read none of what I posted. Tell me, in any economic climate, where there is room, amongst the rest of the carriers, where there might be room for 80K+ employees? The other carriers are trying to cut costs, too, so usually aren't looking to bring on any additional employees. They might fill in some holes in the company, but that's about it.

Quoting UALWN (Reply 47):
Under Chapter 11, however, the weaklings return having shed a ton of liability, and ready to start back again with an unfair competitive advantage with respect to those companies that pay off all their debts, thereby preventing evolution from performing its magic...

Those "weaklings" you're so ready to dismantle are also some companies that at one time were very, very well run and have fallen on hard times. You'd rather throw those employees that worked very hard to make it a viable company, out on the street, rather than let them try to make a go of it. How many companies that have gone into chapter 7 have actually had the company bought by another entity, lock, stock and barrel and operated it as a new company? Seems to me, any airline, in the U.S., that has liquidated, has been bought off, piecemeal and not whole.



"A committee is a group of the unprepared, appointed by the unwilling, to do the unnecessary"----Fred Allen
User currently offlineUALWN From Andorra, joined Jun 2009, 2671 posts, RR: 2
Reply 51, posted (1 year 5 months 3 days 18 hours ago) and read 5401 times:

Quoting mayor (Reply 50):
You'd rather throw those employees that worked very hard to make it a viable company, out on the street, rather than let them try to make a go of it.

But by letting them try to get a go of it with an unfair advantage over the companies who have managed to avoid falling on hard times, they distort the market and make life much more difficult for those other companies and their employees, leading to more bankruptcies and more pain for everybody.



AT7/111/146/Avro/CRJ/CR9/EMB/ERJ/E75/F50/100/L15/DC9/D10/M8X/717/727/737/747/757/767/777/AB6/310/319/320/321/330/340/380
User currently onlineBMI727 From United States of America, joined Feb 2009, 15499 posts, RR: 26
Reply 52, posted (1 year 5 months 3 days 18 hours ago) and read 5363 times:

Quoting redflyer (Reply 43):
It would be better, in my opinion, to let the organization default and go into liquidation.

...which is exactly what happens if a plan cannot be made to reorganize. Chapter 11 doesn't bail out a company or fix anything about them, it just buys time to maybe fix things.

Quoting redflyer (Reply 43):
Once that is done, if there are competitors that were in the same situation then they suddenly have a disadvantage. Why?

Because their costs are too high to allow them to make a profit.

Quoting UALWN (Reply 51):
But by letting them try to get a go of it with an unfair advantage over the companies who have managed to avoid falling on hard times,

It's not really an unfair advantage if private entities are agreeing to do it. If you want to bankroll a money losing company, you can. It's what Virgin America's been doing since they started.



Why do Aerospace Engineering students have to turn things in on time?
User currently offlinePITingres From United States of America, joined Dec 2007, 1089 posts, RR: 13
Reply 53, posted (1 year 5 months 3 days 17 hours ago) and read 5359 times:

Quoting UALWN (Reply 51):
But by letting them try to get a go of it with an unfair advantage over the companies who have managed to avoid falling on hard times, they distort the market and make life much more difficult for those other companies and their employees, leading to more bankruptcies and more pain for everybody.

Maybe, but even if you take your statement as a given (and I think it's arguable in general), it still is likely better overall to have everyone share some pain rather than tossing a significant fraction of the industry's workers out onto the street. (and their vendors, and their workers, and the knock-on foreclosures and personal bankruptcies, and so on.) I suppose it would be a windfall for the personal bankruptcy lawyers, but I don't see that as a good thing. It strikes me as foolish and short-sighted to worry about fairness to other airlines and ignore unfairness to workers and direct or indirect vendors.



Fly, you fools! Fly!
User currently offlinemayor From United States of America, joined Mar 2008, 9978 posts, RR: 14
Reply 54, posted (1 year 5 months 3 days 17 hours ago) and read 5361 times:

Quoting UALWN (Reply 51):
But by letting them try to get a go of it with an unfair advantage over the companies who have managed to avoid falling on hard times, they distort the market and make life much more difficult for those other companies and their employees, leading to more bankruptcies and more pain for everybody.

And, with the exception of CO, no one has had more than ONE bankruptcy and I really don't see any others, happening for quite awhile, if ever. It's not like there's a bunch of repeaters, out there. They've ALL fallen on hard times, but they've managed, thru Ch 11, to survive, where others, i.e. EA, TW, PA, etc. have not. The system, no matter how clumsy, works.
DL is doing what it can, by paying down debt, refinery, etc. to avoid having to enter into BK, again, if another economic distaster should hit them. I would hope that the other carriers are doing what they can, in their own way, to do the same thing.



"A committee is a group of the unprepared, appointed by the unwilling, to do the unnecessary"----Fred Allen
User currently offlineUALWN From Andorra, joined Jun 2009, 2671 posts, RR: 2
Reply 55, posted (1 year 5 months 3 days 17 hours ago) and read 5365 times:

Quoting BMI727 (Reply 52):
If you want to bankroll a money losing company, you can. It's what Virgin America's been doing since they started.

As far as I know, VX is paying all their bills, unlike the companies in Ch. 11. That's the unfair advantage.

Quoting PITingres (Reply 53):
It strikes me as foolish and short-sighted to worry about fairness to other airlines and ignore unfairness to workers and direct or indirect vendors.

But, as I said, the proven consequence of an airline filing for Ch. 11 is.... other airlines filing for Ch. 11, hence generating pain for everybody in the industry, including the employees of those airlines, and preventing the much needed consolidation.



AT7/111/146/Avro/CRJ/CR9/EMB/ERJ/E75/F50/100/L15/DC9/D10/M8X/717/727/737/747/757/767/777/AB6/310/319/320/321/330/340/380
User currently offlineUALWN From Andorra, joined Jun 2009, 2671 posts, RR: 2
Reply 56, posted (1 year 5 months 3 days 17 hours ago) and read 5362 times:

Quoting mayor (Reply 54):
They've ALL fallen on hard times, but they've managed, thru Ch 11, to survive,

Thereby exacerbating the chronic overcapacity of the industry as a whole.

Quoting mayor (Reply 54):
where others, i.e. EA, TW, PA, etc. have not.

TW was actually acquired (and yes, all but dismantled) by AA. But it did not go the way of PA or EA.



AT7/111/146/Avro/CRJ/CR9/EMB/ERJ/E75/F50/100/L15/DC9/D10/M8X/717/727/737/747/757/767/777/AB6/310/319/320/321/330/340/380
User currently offlinemayor From United States of America, joined Mar 2008, 9978 posts, RR: 14
Reply 57, posted (1 year 5 months 3 days 16 hours ago) and read 5365 times:

Quoting UALWN (Reply 56):
Quoting mayor (Reply 54):where others, i.e. EA, TW, PA, etc. have not.
TW was actually acquired (and yes, all but dismantled) by AA. But it did not go the way of PA or EA.

My point was that those three carriers did not fail because someone else was in BK. They did it all on their own.



"A committee is a group of the unprepared, appointed by the unwilling, to do the unnecessary"----Fred Allen
User currently offlinempdpilot From United States of America, joined Jul 2006, 986 posts, RR: 0
Reply 58, posted (1 year 5 months 3 days 16 hours ago) and read 5362 times:

Quoting rfields5421 (Reply 39):
Fees and such owed to the federal government by the airline are unsecured debts, which have been written off in the recent airline bankruptcies.

I will agree that this might be an issue with how Chapter 11 is handled, but at the end of the day with Chapter 7 the government will get even less.

Quoting rfields5421 (Reply 39):
Airline employees who lose their jobs are eligible for federally funded extended unemployment benefits.

Airline employees who lose their jobs may qualify for federally funded job retaining programs.

Airline employees who lose their jobs often qualify for food stamps after primary separation benefits run out.

Airline employees who lose their jobs and/or medical insurance can qualify for Medicaid if they have children. Even if they do not, they join the uninsured pool, which is a big drain on local, state and federal government which have to fund ER care at public hospitals across the nation.

Airline pensions which are turned over to the Pension Benefit Guaranty Board have never been fully funded at the reduced levels. The PBGB obligations to pay out are near the level of the obligations to pay out Social Security, with substantially fewer assets to fund those payments. The US taxpayers are responsible for any payments the PBGB cannot fund from assumed pension plans and contributions from participating companies.

I know it has already been said but it bears repeating, with Chapter 7, instead of a few thousand employees being laid off, tens of thousands of employees are laid off.

This doesn't even mention the drop in economic activity should an airline like American close. Even if DL, US, and UA bought their assets right away, there would still likely be a fair amount of time without operations in the interim.

Quoting redflyer (Reply 46):
Of course employees are impacted. But, believe it or not, they probably fare better than creditors and suppliers do. Employees will find work with other carriers/companies with minimal impact (relatively speaking - I am NOT diminishing the emotional toll these things will take). Usually in a BK liquidation the employees will find work with other organizations, often times the very ones that pick up the liquidated organization's assets and/or market share.

In any other industry I would say you are totally right. In the airline industry with seniority being the driving factor, I would say you are dead wrong. Even if the employees get jobs at other carriers, because it went into liquidation, they would likely just be stapled on the bottom of the seniority list of the surviving carriers. So now in addition to loosing their pensions, now they are also taking upwards of a 50% pay cut.

On another note, the issue that airlines are or have had with pensions is the same problem that Social Security is having. Promising to pay a certain amount to people when they retire (20-30 years down the road), then in 20-30 years not having the money. Defined benefit plans don't work. Airlines have learned this the hard way and now most airlines offer defined contribution plans instead, something the airline will never be able to take away from the employees ever again.



One mile of highway gets you one mile, one mile of runway gets you anywhere.
User currently onlineBMI727 From United States of America, joined Feb 2009, 15499 posts, RR: 26
Reply 59, posted (1 year 5 months 3 days 16 hours ago) and read 5363 times:

Quoting mayor (Reply 54):
They've ALL fallen on hard times, but they've managed, thru Ch 11, to survive, where others, i.e. EA, TW, PA, etc. have not. The system, no matter how clumsy, works.

And a lot of that can be traced back to deregulation, which set the entire cycle in motion and might just be ending now. There are always upsets in the market, but those railing against the lack of "market equilibrium" should be aiming their ire at the government for enforcing a false equilibrium for so long and then removing it.

Quoting UALWN (Reply 55):
As far as I know, VX is paying all their bills, unlike the companies in Ch. 11.

...but only because they've had investors continue to pump money in. How is it fair that they get investors to subsidize their losses?



Why do Aerospace Engineering students have to turn things in on time?
User currently offlinetdscanuck From Canada, joined Jan 2006, 12709 posts, RR: 80
Reply 60, posted (1 year 5 months 3 days 16 hours ago) and read 5375 times:

Quoting mayor (Reply 54):
And, with the exception of CO, no one has had more than ONE bankruptcy

US Airways had two...

Tom.


User currently offlinemayor From United States of America, joined Mar 2008, 9978 posts, RR: 14
Reply 61, posted (1 year 5 months 3 days 16 hours ago) and read 5367 times:

Quoting tdscanuck (Reply 60):
US Airways had two...

My mistake.....I stand corrected. But no matter.....no one is using it like aspirin for pain.....take them until the pain goes away.



"A committee is a group of the unprepared, appointed by the unwilling, to do the unnecessary"----Fred Allen
User currently offlineuALWN From Andorra, joined Jun 2009, 2671 posts, RR: 2
Reply 62, posted (1 year 5 months 3 days 16 hours ago) and read 5368 times:

Quoting BMI727 (Reply 59):
...but only because they've had investors continue to pump money in. How is it fair that they get investors to subsidize their losses?

If VX manage to convince investors, kudos to them. Maybe they have a magic plan that both you and I ignore. I don't see the similarity with failing to pay the debts and being allowed to renegade on all sort of contracts and commitments. That's an obvious unfair advantage that nobody else can enjoy except by filing as well for Ch. 11, starting the vicious cycle once again.

I fail to see why some people think that this vicious cycle is about to finish, when AA, the largest airline in the world until a couple of years ago, is in Ch. 11 protection right now. Once AA exits Ch. 11, with lower debt and much lower costs, it will be UA's turn. And on and on it goes...



AT7/111/146/Avro/CRJ/CR9/EMB/ERJ/E75/F50/100/L15/DC9/D10/M8X/717/727/737/747/757/767/777/AB6/310/319/320/321/330/340/380
User currently offlinempdpilot From United States of America, joined Jul 2006, 986 posts, RR: 0
Reply 63, posted (1 year 5 months 3 days 16 hours ago) and read 5364 times:

Quoting BMI727 (Reply 59):
And a lot of that can be traced back to deregulation, which set the entire cycle in motion and might just be ending now. There are always upsets in the market, but those railing against the lack of "market equilibrium" should be aiming their ire at the government for enforcing a false equilibrium for so long and then removing it.

Well said!! Most of the issues today can be traced back to pre-1978.

Quoting uALWN (Reply 62):
I fail to see why some people think that this vicious cycle is about to finish, when AA, the largest airline in the world until a couple of years ago, is in Ch. 11 protection right now. Once AA exits Ch. 11, with lower debt and much lower costs, it will be UA's turn. And on and on it goes...

Well, answer me this, what would cause UA to go into Chapter 11? What cost would go up that doesn't go up for everyone else?

I don't think people realize how crippling defined benefit retirement plans are. I also don't think people realize how crippling a union that demands to maintain the status quo or better can be.



One mile of highway gets you one mile, one mile of runway gets you anywhere.
User currently offlines5daw From Slovenia, joined May 2011, 241 posts, RR: 0
Reply 64, posted (1 year 5 months 3 days 16 hours ago) and read 5365 times:

As this is somewhat related:

it's possible Adria Airways will need to return state aid: http://goo.gl/fU1VA
I can't imagine this would mean anything but bankruptcy for Adria.

And of course, as the article mentions, the problem is that state aid might have created an unfair advantage on the market .

[Edited 2012-11-20 12:09:10]

User currently offlineuALWN From Andorra, joined Jun 2009, 2671 posts, RR: 2
Reply 65, posted (1 year 5 months 3 days 15 hours ago) and read 5364 times:

Quoting mpdpilot (Reply 63):
Well, answer me this, what would cause UA to go into Chapter 11? What cost would go up that isn't go up for everyone else?

Compared with the situation before AA's bankruptcy, many costs for UA will raise relative to those for AA: debt servicing, labor, pensions...

Quoting mpdpilot (Reply 63):
I don't think people realize how crippling defined benefit retirement plans are.

And yet they work just fine in many countries. But I guess they are properly managed...



AT7/111/146/Avro/CRJ/CR9/EMB/ERJ/E75/F50/100/L15/DC9/D10/M8X/717/727/737/747/757/767/777/AB6/310/319/320/321/330/340/380
User currently offlineLufthansa From Christmas Island, joined May 1999, 3197 posts, RR: 10
Reply 66, posted (1 year 5 months 3 days 15 hours ago) and read 5364 times:

Quoting mayor (Reply 50):
Obviously, you read none of what I posted. Tell me, in any economic climate, where there is room, amongst the rest of the carriers, where there might be room for 80K+ employees? The other carriers are trying to cut costs, too, so usually aren't looking to bring on any additional employees. They might fill in some holes in the company, but that's about it.

It's then likely there is overcapacity in the market. That is something that can't be sustained long term. So B fails, and A picks up say 50 or 60 thousand of its staff. That's probably were the market should be. The other way is B stays and starts laying people off (probably the more responsible way...they never let it get out of hand in the first place). Either way in this situation you have too much capacity in the market.

Quoting UALWN (Reply 51):
But by letting them try to get a go of it with an unfair advantage over the companies who have managed to avoid falling on hard times, they distort the market and make life much more difficult for those other companies and their employees, leading to more bankruptcies and more pain for everybody.

Exactly.

Let me folks, give you an example a little closer to home. Ansett Australia. Ansett was a wonderful airline, amazing service. On a 1 hr flight you'd get a 3 course meal, and at one point, amazingly on a 737 they operated 3 classes of service! But at the same time it was a dinosaur. It came to be largely through a history of government protection, and when the free market finally came, it couldn't, or outright refused to change. 2 years after the final Ansett flight, Virgin well and truly had replaced it, taking on the former's terminals, and being the main competitor to Qantas. It took a little while for virgin to ramp up operations, but within 2 years it was well and truly established. It carried the same amount of PAX as ansett did in its final year, on 1/3 of the aircraft and 1/3 of the staff. Lots of Ansett staff got new jobs at both virgin and Qantas, but for some, it was the end of the line. So if virgin could do, on 1/3 of the capacity what Ansett used to do, should we have artifically kept Ansett alive? Of course not! I miss them. I had my very first flight with them. I had family working with them. They were very much a part of our lives. But, they didn't adapt. They outright refused, and they rightly got what was coming to them. Virgin Australia serves the country far more effectively. It was painful at the time, but this is no different to not having lift operators or bank tellers everywhere. Progress means we must become more efficient, and that in turn grows the economy. Nobody wants to lose their job. I experienced my first airline bankruptcy this year. It wasn't fun. To make it worse it was my first airline job. But, these are the rules of the free market. If we start to play favourites, the market as a whole pays the price. The Australian market has largely reached equilibrium. the US market hasn't. I would argue, the european market is closer to it, with the Alitalia merger, Olympic now out of the scene, BMI absorbed into BA and SAS likely to become a Lufthansa feeder at some point... you can see a clear pattern of a few dominate players and then the likes of easyjet keeping prices in check. This is the natural reality of the modern market. We need to let it happen. Yes, its painful when people lose their jobs. I know, I was one of them!!!!!! But the reality is, its necessary for companies to face market forces to be lean and efficient and serve a country well.


User currently offlinePITingres From United States of America, joined Dec 2007, 1089 posts, RR: 13
Reply 67, posted (1 year 5 months 3 days 15 hours ago) and read 5364 times:

Quoting UALWN (Reply 55):
But, as I said, the proven consequence of an airline filing for Ch. 11 is.... other airlines filing for Ch. 11, hence generating pain for everybody in the industry, including the employees of those airlines, and preventing the much needed consolidation.

Very, very far from proven. We've observed serial bankruptcy, sure. It is a logical fallacy to imagine that because we've seen A cause B some (small) number of times, A always causes B, and that's what you are trying to claim.

Again, I don't pretend to know if Chapter 11 as used by the airlines is the right way to do things, but I sure do know that the analyses I'm reading here are very simplistic. People simply don't always behave according to the game theoretic models.



Fly, you fools! Fly!
User currently offlinePITingres From United States of America, joined Dec 2007, 1089 posts, RR: 13
Reply 68, posted (1 year 5 months 3 days 14 hours ago) and read 5359 times:

Quoting Lufthansa (Reply 66):
Let me folks, give you an example a little closer to home. Ansett Australia.

I'm not really sure what point you are trying to make here. Are you perhaps assuming that every US airline in trouble is going to go into Chapter 11 and come out the other end? That's not the case, and there are plenty of counter-examples; Eastern, Braniff, Pan Am, etc. I don't see what relevance this has to the thesis, which I take to be "in the airline industry, Chapter 11 is always bad and evil."



Fly, you fools! Fly!
User currently offlineLufthansa From Christmas Island, joined May 1999, 3197 posts, RR: 10
Reply 69, posted (1 year 5 months 3 days 13 hours ago) and read 5361 times:

Quoting PITingres (Reply 68):
I'm not really sure what point you are trying to make here. Are you perhaps assuming that every US airline in trouble is going to go into Chapter 11 and come out the other end? That's not the case, and there are plenty of counter-examples; Eastern, Braniff, Pan Am, etc. I don't see what relevance this has to the thesis, which I take to be "in the airline industry, Chapter 11 is always bad and evil."

I'd give specific examples but the problem here is if I mention a brand name of an existing airline, people have an emotional attachment to it and we can't see it in terms of economics without that involved. Lets just say that if we said "no more restructures unless you can independently come up with new capital without protection" some of the existing players would have been forced to liquidate. When they did this, some of the better run carriers would have rapidly expanded, and rightly got the reward they deserved for doing a good job. This is the problem with chapter 11. It largely distorts this process. If Australia had chapter 11 bankruptcy laws, Ansett would still be flying. Not only that, it would have a long haul network too, though probably not that big. Qantas would be far weaker, Qantas would not have expanded. Virgin would be far far smaller. All three companies would be financially shaky. There would be no jetstar, and the staff would all have less secure jobs. Clearly, the market reshaping itself via Virgin replacing Ansett has been good for Australia. But Chap 11 would have prevented that happening. That, on a larger scale, is the exact situation you face in the United States. The current round of mergers are attempting achieve that result. The market is heading towards equilibrium. And in equilibrium airlines should have more pricing power than they do. It would have happened a lot faster and a lot more efficiently if there was no bail out for companies heading in the wrong direction. Also, those companies would be less likely to head in the wrong direction because both Management and Labor would get a dose of cold reality. Get this right... or we both won't be here to talk about it.


User currently offlinempdpilot From United States of America, joined Jul 2006, 986 posts, RR: 0
Reply 70, posted (1 year 5 months 3 days 13 hours ago) and read 5363 times:

Quoting uALWN (Reply 65):
Compared with the situation before AA's bankruptcy, many costs for UA will raise relative to those for AA: debt servicing, labor, pensions...

What pensions? UA got rid of them in Bankruptcy. Does AA not have debt service and labor costs? AA's bankruptcy is not going to bring their costs down below UA's or DL's, it will bring it in line with their costs.

Quoting uALWN (Reply 65):
And yet they work just fine in many countries. But I guess they are properly managed...

Name a country without extensive population growth in the last 50 years that doesn't have a problem with defined benefit retirement plans.

The issue with defined benefit plans is that they require the younger generation to provide for the retired generations and that is only possible if the generations continue to grow at a steady rate. In the US and in most countries, you see a steep increase in population followed by a slower increase in population and you find yourself with not enough workers to support the larger retired population. Example, when the baby boomers retire there will not be enough people working and paying into defined benefit coffers to support the large amounts of money being paid out to this large retired population. The math just doesn't work.



One mile of highway gets you one mile, one mile of runway gets you anywhere.
User currently offlineuALWN From Andorra, joined Jun 2009, 2671 posts, RR: 2
Reply 71, posted (1 year 5 months 3 days 13 hours ago) and read 5362 times:

Quoting mpdpilot (Reply 70):
Name a country without extensive population growth in the last 50 years that doesn't have a problem with defined benefit retirement plans.

Without extensive population growth in the last 50 years? I don't know any country like that, sorry.

Quoting mpdpilot (Reply 70):
Does AA not have debt service and labor costs?

They will be lower than before Ch 11 (isn't this the whole point?). Hence, UA will be at a disadvantage compared to the situation before AA's bankruptcy. Let's be clear here. AA's didn't file for Ch. 11 because they couldn't pay their bills. They did it in order to regain the competitiveness lost to UA, DL, and US. And why did AA lose that competitive edge? Because UA, CO (twice), NW, DL and US (twice) all shed liability and cost through their trips to Ch. 11. AA had to do the same. Actually, many analysis (and people here) had explained how wrong were AA to forgo the advantages of Ch. 11 for exactly this purpose.



AT7/111/146/Avro/CRJ/CR9/EMB/ERJ/E75/F50/100/L15/DC9/D10/M8X/717/727/737/747/757/767/777/AB6/310/319/320/321/330/340/380
User currently offlinemayor From United States of America, joined Mar 2008, 9978 posts, RR: 14
Reply 72, posted (1 year 5 months 3 days 12 hours ago) and read 5340 times:

Quoting Lufthansa (Reply 69):
When they did this, some of the better run carriers would have rapidly expanded, and rightly got the reward they deserved for doing a good job.

Let me ask you this........which of the airlines was better run than any of those that went into bankruptcy? Were any of those carriers REALLY any better run than those that filed bankruptcy over past couple of decades? Marginally, maybe, but not good enough for anyone to crow about it. Seems like over the past few years, most were hanging by a thread and then something like 9/11 or a fuel spike comes along and BOOM!!!.......we're hemmoraghing money.



"A committee is a group of the unprepared, appointed by the unwilling, to do the unnecessary"----Fred Allen
User currently offlineCubsrule From United States of America, joined May 2004, 22319 posts, RR: 20
Reply 73, posted (1 year 5 months 3 days 12 hours ago) and read 5341 times:

Quoting uALWN (Reply 71):
AA's didn't file for Ch. 11 because they couldn't pay their bills.

Are you suggesting that their petition should be dismissed? That would be the logical conclusion to be drawn from your statement, but I don't see how you can make that argument if you have read the petition.

Quoting Lufthansa (Reply 69):
If Australia had chapter 11 bankruptcy laws, Ansett would still be flying.

How can you possibly know that?



I can't decide whether I miss the tulip or the bowling shoe more
User currently offlinebrilondon From Canada, joined Aug 2005, 4059 posts, RR: 1
Reply 74, posted (1 year 5 months 3 days 12 hours ago) and read 5335 times:

Quoting UALWN (Reply 49):
This is one of them. But see also my second paragraph above, about the unfair competitive advantage afforded to those companies who are allowed to come back after Ch. 11.

That is the point of Ch. 11 is it not? Chapter 11 allows a company to restructure its self with out the encumbrances of having to keep up with certain obligations. The bankruptcy judge determines how much or how little capital the company can use during its Ch. 11 reorganization. To say it is unfair is a little simplistic when every bankruptcy is different. What you are questioning is exactly what this form of reorganization is for.

Quoting UALWN (Reply 51):
But by letting them try to get a go of it with an unfair advantage over the companies who have managed to avoid falling on hard times, they distort the market and make life much more difficult for those other companies and their employees, leading to more bankruptcies and more pain for everybody.

If this were the case, then why would every company not declare bankruptcy when say labour rates are up for negotiation. You think that all the companies want to get them selves into a situation where they have to declare bankruptcy? It is far better to operate without being in bankruptcy. Any suggestion that a company wants to go into bankruptcy just so they don't have to pay their bills is asinine.



Rush for ever; Yankees all the way!!
User currently offlineuALWN From Andorra, joined Jun 2009, 2671 posts, RR: 2
Reply 75, posted (1 year 5 months 3 days 11 hours ago) and read 5307 times:

Quoting Cubsrule (Reply 73):
Are you suggesting that their petition should be dismissed?

No. It's in line with what Ch. 11 has become.

Quoting brilondon (Reply 74):
Chapter 11 allows a company to restructure its self with out the encumbrances of having to keep up with certain obligations.

Nicely put. Ch. 11 allows a company and its upper management to survive without having to pay their debts. That's an unfair advantage compared to the companies who pay their bills on time, every time.

Quoting brilondon (Reply 74):
Any suggestion that a company wants to go into bankruptcy just so they don't have to pay their bills is asinine.

Really? Well, didm't you just say that in the lines quoted above? Oh wait, you said "with out the encumbrances of having to keep up with certain obligations." Very different, I guess...

Quoting brilondon (Reply 74):
If this were the case, then why would every company not declare bankruptcy when say labour rates are up for negotiation.

Because Ch.11 wipes out the money of the stockholders of the company. Therefore, a company who went regularly through Ch. 11 should find it difficult to raise capital in the markets. Should... because there are suckers everywhere.



AT7/111/146/Avro/CRJ/CR9/EMB/ERJ/E75/F50/100/L15/DC9/D10/M8X/717/727/737/747/757/767/777/AB6/310/319/320/321/330/340/380
User currently offlinerfields5421 From United States of America, joined Jul 2007, 7348 posts, RR: 32
Reply 76, posted (1 year 5 months 3 days 11 hours ago) and read 5274 times:

Quoting mpdpilot (Reply 58):
with Chapter 7, instead of a few thousand employees being laid off, tens of thousands of employees are laid off.

I disagree.

The current wave of airline CH 11 bankruptcies in the US has shed as many or more employees than a Ch 7 bankruptcy.

The presumption of many folks on this forum is that if Ch 7 occurred, the airline would shut down and the service would not be replaced by other carriers.

Yes, they would end up on the bottom of the seniority list, but they would have jobs.

My belief is that several of the airlines which went through Ch 11 would not have filed for Ch 7. Rather use labor arbitration and other tools to successfully avoid Ch 7 liquidation.

Also re pensions. Under Ch 7, the PBGB is a secured creditor, however under Ch 11, the PBGB is not a creditor. They only have a position to seek assets under Ch 11 after a notice of termination of the pension plan has been issued. At that point, the secured creditors have already been guaranteed most of the airline liquid and future assets.

Now the law did change - and AA is finding to their dismay that shedding the pension plans will cost them the majority of their on-hand cash, and saddle the post Ch 11 airline with payment obligation to the PBGB.

NOTE - I will say the root cause of the pension problem is the US Congress which allowed underfunded pension plans to build such huge future obligations. Had the companies been forced to fund the pensions, they would have dealt with the true costs up front.

[Edited 2012-11-20 17:07:37]

User currently offlinebrilondon From Canada, joined Aug 2005, 4059 posts, RR: 1
Reply 77, posted (1 year 5 months 3 days 10 hours ago) and read 5260 times:

Quoting rfields5421 (Reply 76):
The current wave of airline CH 11 bankruptcies in the US has shed as many or more employees than a Ch 7 bankruptcy.

Yes, but you see if there were only Ch. 7 bankruptcies, then there would be complete shut down of the organization. Thus throwing all of the workers out on to the street.


**Edited due to flame bait/harsh language**

[Edited 2012-11-21 00:19:37 by 777ER]


Rush for ever; Yankees all the way!!
User currently offlinemayor From United States of America, joined Mar 2008, 9978 posts, RR: 14
Reply 78, posted (1 year 5 months 3 days 10 hours ago) and read 5257 times:

Quoting brilondon (Reply 77):
Yes, but you see if there were only Ch. 7 bankruptcies, then there would be complete shut down of the organization. Thus throwing all of the workers out on to the street.

True.....if there was ONLY liquidation, who would be left........B6, WN, NK, AS, etc.?



"A committee is a group of the unprepared, appointed by the unwilling, to do the unnecessary"----Fred Allen
User currently offlinePSU.DTW.SCE From United States of America, joined Jan 2002, 7350 posts, RR: 28
Reply 79, posted (1 year 5 months 3 days 10 hours ago) and read 5239 times:

Textbook economic theory sounds good in practice, but in reality it does not always work that way due to an inability for all variables to react instantainously.

The challenge with an airline is that there are high fixed costs and numerous long term obligations necessary to run an airline. Meanwhile demand and a significant portion of cost (fuel) are controlled by external factors. An airline cannot always adjust its cost base to align with revenue with demand fluctuates.

Ch. 11 allows for an orderly restructuring. Yes, everyone gets collectively "screwed" but in most cases less screwed than an abrupt shutdown. The premise of Ch. 11 is that well the past is the past, how to we attempt to recover as much as possible. A large Ch. 7 shutdown has the potential to be disasterous for suppliers, vendors, communities, lenders, employees, and pretty much everyone involved. Ch. 11 reorganization enables all of those parties that have a stake in the matter to still continue to receive some amount of payment, although less than they would've had the company remained outside of bankruptcy protection.

Bankruptcy is not about the competition, it is about how those who have a stake in the business or who are owed money can recover the debts or payment.


User currently offlinempdpilot From United States of America, joined Jul 2006, 986 posts, RR: 0
Reply 80, posted (1 year 5 months 3 days 9 hours ago) and read 5205 times:

Quoting uALWN (Reply 71):
They will be lower than before Ch 11 (isn't this the whole point?). Hence, UA will be at a disadvantage compared to the situation before AA's bankruptcy. Let's be clear here. AA's didn't file for Ch. 11 because they couldn't pay their bills. They did it in order to regain the competitiveness lost to UA, DL, and US. And why did AA lose that competitive edge? Because UA, CO (twice), NW, DL and US (twice) all shed liability and cost through their trips to Ch. 11. AA had to do the same. Actually, many analysis (and people here) had explained how wrong were AA to forgo the advantages of Ch. 11 for exactly this purpose.

Yes, AA will have lower costs after Chapter 11. However this is relative to AA prior to the merger. This is not relative to UA. Relative to UA they will likely have very similar costs to UA after bankruptcy. For example if AA's cost in 2009 are 10 and UA's cost in 2009 is 10, UA goes through Chapter 11 and reduces cost to 7, the unevenness becomes a problem. AA isn't going to reduce their costs down to 4, they are reducing them down to 7. There is not leapfroging going on here.

Quoting rfields5421 (Reply 76):
The current wave of airline CH 11 bankruptcies in the US has shed as many or more employees than a Ch 7 bankruptcy.

The presumption of many folks on this forum is that if Ch 7 occurred, the airline would shut down and the service would not be replaced by other carriers.

Yes, they would end up on the bottom of the seniority list, but they would have jobs.

The big assumption here is that if AA filled Chapter 7 is that ALL OF THE AIRPLANES and ALL OF THE EMPLOYEES would be purchased by other airlines. That would not happen. Airlines would purchase the "good" airplanes and hire the employees that they need based on the increased market share. NOT EVERY EMPLOYEE, nor EVERY AIRCRAFT would remain in operation.

What would likely happen is that the most senior guys and gals at AA would get added on to the bottom of the seniority list, and least senior guys would be out of work, and unless this pilot shortage continues, they would be out of work for quite some time.

Verse Chapter 11 or no filling, where far less people would be laid off. For example, I have not heard of Pilots at American being laid off with their Chapter 11 filing, but I guarantee you that if they filled Chapter 7, a large number of pilots would be out of work.

Based on what I know about the industry this is what would happen if AA filled Chapter 7:

The MD-82s would all go to the desert, DL, UA, and US would take the other aircraft and move their own aircraft in to fill the hubs that AA left, and enjoy higher yields with the lower national supply of air travel, fares across the country would rise and at most 75% of the employees at AA would have jobs.

Quoting rfields5421 (Reply 76):
NOTE - I will say the root cause of the pension problem is the US Congress which allowed underfunded pension plans to build such huge future obligations. Had the companies been forced to fund the pensions, they would have dealt with the true costs up front.

This is absolutely the problem, but I don't think it would have prevented Chapter 11 filings, the filings would have just been sooner.



One mile of highway gets you one mile, one mile of runway gets you anywhere.
User currently offlineCubsrule From United States of America, joined May 2004, 22319 posts, RR: 20
Reply 81, posted (1 year 5 months 3 days 9 hours ago) and read 5192 times:

Quoting uALWN (Reply 75):
No. It's in line with what Ch. 11 has become.

What do you mean by "pay their bills?" What section of the Code would authorize a filing by a debtor who can, as you put it, "pay their bills?"



I can't decide whether I miss the tulip or the bowling shoe more
User currently offlineLufthansa From Christmas Island, joined May 1999, 3197 posts, RR: 10
Reply 82, posted (1 year 5 months 3 days 8 hours ago) and read 5181 times:

Quoting mpdpilot (Reply 80):
The MD-82s would all go to the desert, DL, UA, and US would take the other aircraft and move their own aircraft in to fill the hubs that AA left, and enjoy higher yields with the lower national supply of air travel, fares across the country would rise and at most 75% of the employees at AA would have jobs.

If this is the situation, it means there is likely overcapacity in the market. This is the market naturally correcting itself. In any market, there are two sides, supply and demand. In most industries, it is considered quite normal to be able to earn at least the cost of capital, but in the airline industry it has been though, if not impossible. It wouldn't be unreasonable to suggest that some of that capacity, that lead to ruthless discounting is unsustainable and thus needs to be removed from the market. That would lead to a long term healthier industry and one that could afford to look after it's staff better. That's not necessarily a bad thing. I'm going to put it out there and say that prices are currently too low, and they really need to rise a little, even if its by a mere 5%. That would make a huge difference to profitability. People don't have some kind of intrinsic "right" to a good or service produced below the cost of capital. This Chap 11 process has prevented this kind of adjustment happening. I'm hoping the mergers will in the end get a lot of the same result, and put some more market power back to the airline. Unfortunately, when you have too much capacity that does mean job losses. That cannot be denied. But its part of the adjusting process when there is too much capacity in any given market. It doesn't matter if its retail, banking services, airlines or manufacturing. It's not nice. But its reality. I've been through it personally, and it really is demoralising. But it needs to happen at times.


User currently onlineBMI727 From United States of America, joined Feb 2009, 15499 posts, RR: 26
Reply 83, posted (1 year 5 months 3 days 8 hours ago) and read 5178 times:

Quoting uALWN (Reply 62):
If VX manage to convince investors, kudos to them.

Absolutely. But that's not really different than convincing investors and creditors. (And a judge)

Quoting mpdpilot (Reply 63):
Well said!! Most of the issues today can be traced back to pre-1978.

Decades of regulation helped allow the airlines to get their costs out of line.



Why do Aerospace Engineering students have to turn things in on time?
User currently offlinempdpilot From United States of America, joined Jul 2006, 986 posts, RR: 0
Reply 84, posted (1 year 5 months 3 days 8 hours ago) and read 5168 times:

Quoting Lufthansa (Reply 82):

Oh I agree there is over capacity in the system and AA failing would surely make DL, UA, US, and WN far more stable. However, the argument that is being made is that by allowing AA to go through Chapter 11 or any airline for that matter is worse for the market/employees/stakeholders than Chapter 7. This is not the case. It might be better for the market, but that is it. It is not better for everything else. And arguably there are other ways to fix over supply.

At the end of the day, Chapter 11 is not the problem. Poorly run companies and poorly regulated markets are the problem, Chapter 11 is one solution. Not necessarily the best solution, but I would argue that it is better than Chapter 7.



One mile of highway gets you one mile, one mile of runway gets you anywhere.
User currently offlineFlyingAY From Finland, joined Jun 2007, 698 posts, RR: 0
Reply 85, posted (1 year 5 months 3 days 4 hours ago) and read 5102 times:

Quoting mayor (Reply 78):
True.....if there was ONLY liquidation, who would be left........B6, WN, NK, AS, etc.?

Do you think that the demand for air travel would disappear if UA/AA/DL went bankcrupt? No, it wouldn't. And in a free market the existing players and new entrants to the market would come in to fill this demand. Maybe it would be B6, WN, AS or a totally new player - but definitely there would be someone there if there is business to be made.

Quoting mpdpilot (Reply 80):
The big assumption here is that if AA filled Chapter 7 is that ALL OF THE AIRPLANES and ALL OF THE EMPLOYEES would be purchased by other airlines. That would not happen. Airlines would purchase the "good" airplanes and hire the employees that they need based on the increased market share. NOT EVERY EMPLOYEE, nor EVERY AIRCRAFT would remain in operation.

Wouldn't this be a good thing in a free market? If there are some employees/equipment that makes it impossible to run a profitable business, through bankrupcy the industry would get rid of these. This would leave space for new entrants and and new innovations and technologies to enter the stage.


User currently offlineuALWN From Andorra, joined Jun 2009, 2671 posts, RR: 2
Reply 86, posted (1 year 5 months 3 days 3 hours ago) and read 5083 times:

Quoting mpdpilot (Reply 80):
There is not leapfroging going on here.

There always is some amount of leapfrogging. Plus, prior to AA's bankruptcy UA was competing with an AA with costs at 10. Now it will compete with an AA with costs at 7. Clearly, this will have an effect on UA. Its relative position with respect to AA will have changed.

Quoting Cubsrule (Reply 81):
What section of the Code would authorize a filing by a debtor who can, as you put it, "pay their bills?"

Are you telling me that AA were close to insolvency and that's why they filed for Ch. 11? That would be rather naive, I think.

Quoting BMI727 (Reply 83):
But that's not really different than convincing investors and creditors. (And a judge)

One thing is convincing them of investing in your company, another thing is convincing them of letting you off the hook of your debts and obligations, in the process screwing your employees and your stockholders, among others. I don't think this is an even comparison.



AT7/111/146/Avro/CRJ/CR9/EMB/ERJ/E75/F50/100/L15/DC9/D10/M8X/717/727/737/747/757/767/777/AB6/310/319/320/321/330/340/380
User currently offlines5daw From Slovenia, joined May 2011, 241 posts, RR: 0
Reply 87, posted (1 year 5 months 3 days 3 hours ago) and read 5083 times:

Quoting FlyingAY (Reply 85):
Wouldn't this be a good thing in a free market? If there are some employees/equipment that makes it impossible to run a profitable business, through bankrupcy the industry would get rid of these.

Not just the industry, but also the society.

Without companies going out of business, we would still have siemens-martin steel ovens in operation... and many other obsolete companies, technology, products...


User currently offlineEagleBoy From Niue, joined Dec 2009, 1745 posts, RR: 2
Reply 88, posted (1 year 5 months 3 days 1 hour ago) and read 5028 times:
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Quoting g500 (Reply 4):
that's harsh but i do like that system, sort of "let the strong survive, and the weak perish"

Is that the basis of the capitalist free market?

Quoting Lufthansa (Reply 3):
chap 11 basically says the creditors can get more as a going concern than as a whole. but at the end of the day...they took a risk and extended credit. if it looked too risky they shouldn't have done that.
Quoting BMI727 (Reply 5):
Chapter 11 is a temporary protection of a company's assets while they work to come up with a plan that the court and creditors can (mostly) agree on to fix the problems that caused the bankruptcy. Without that, the company is still dead.
Quoting rfields5421 (Reply 19):
Ch 11 in the US has become a management restructing tool. An acceptable method of shedding company responsibilities rather than actually making the company deal with its obligations.
Quoting rfields5421 (Reply 23):
For example - AMR filed for Ch 11 having substantial operational cash on hand, having previously arranged aircraft lease revisions, etc. AMR was not close to insolvency or having to shut down.

Part of me thinks Ch.11 is a good idea, as even though painful to staff, it does in the long term save the company, the workers, the suppliers and perhaps keeps the aviation sector stable.
Another part dislikes EU state aid to prop up tottering airlines. I feel the airlines that don't require state aid are at a disadvantage. However does the state aid system hark back to the time when some legacy carriers were made to toe the Govt line on some things that may not have made solid business sense?


User currently offlineFlyingAY From Finland, joined Jun 2007, 698 posts, RR: 0
Reply 89, posted (1 year 5 months 3 days 1 hour ago) and read 5018 times:

Quoting EagleBoy (Reply 88):
Another part dislikes EU state aid

Isn't the EU state aid illegal? The EU states, if they are shareholders of the company, may invest more in the company as any private investor could invest in a company. The investments must be made with the same conditions as the private investments, otherwise they might be deemed illegal and must be paid back (case Malév, pending investigations ongoing regarding Adria and Baltic).


User currently offlines5daw From Slovenia, joined May 2011, 241 posts, RR: 0
Reply 90, posted (1 year 5 months 3 days ago) and read 4981 times:

Quoting FlyingAY (Reply 89):
Isn't the EU state aid illegal

Not in all cases, see here http://europa.eu/legislation_summari...competition/state_aid/index_en.htm

The thing is, some companies are very innovative when it comes to getting money for nothing, at least in my "Ex" Communist country.

In case of Adria, the state aid was so bizarre it's not even funny. The Republic of Slovenia owns Adria directly and indirectly, through a company called PDP (state owned). Adria used to own Adria tehnika (airplane maintenance) and to get some "fresh money", it was sold to PDP. The idea here is that this is not state aid, but just a regular financial injection coming from company owner, who happens to be the state. There was also a conversion state owned NLB bank of Adria's debt to shares. Again, adria claims it's all within the rules.

It's really sad. Adria operations are quite OK, just some of FAs are a bit bitchy (e.g. asking for a gate of a short connected flight results in getting "that's not my job" answer).


User currently offlinebrilondon From Canada, joined Aug 2005, 4059 posts, RR: 1
Reply 91, posted (1 year 5 months 2 days 23 hours ago) and read 4955 times:

Quoting Lufthansa (Reply 82):
This is the market naturally correcting itself. In any market, there are two sides, supply and demand. In most industries, it is considered quite normal to be able to earn at least the cost of capital, but in the airline industry it has been though, if not impossible

Ch. 11 allows this to happen. It allows for the airline to revamp its operation and bring costs into line to survive and eventually expand when things are good again.

Quoting uALWN (Reply 86):
One thing is convincing them of investing in your company, another thing is convincing them of letting you off the hook of your debts and obligations, in the process screwing your employees and your stockholders, among others. I don't think this is an even comparison.

Well, for what its worth when a company is in or heading for Ch. 11, the stock price is reflective of the health of a company. The employees are going to suffer even more if the company does not restructure its debt. There will be continued layoffs and eventually shutdown. Just so you know the company is not as you put it "let off the hook". They still owe the money, the debt is just restructured into payments that are more in line with what the company can afford. The court makes it the rules on how the debt is repaid, and yes they do sometimes with the secured creditors approval have some of that debt forgiven.



Rush for ever; Yankees all the way!!
User currently offlineredflyer From United States of America, joined Feb 2005, 4252 posts, RR: 29
Reply 92, posted (1 year 5 months 2 days 22 hours ago) and read 4922 times:

Quoting mayor (Reply 50):
Obviously, you read none of what I posted. Tell me, in any economic climate, where there is room, amongst the rest of the carriers, where there might be room for 80K+ employees? The other carriers are trying to cut costs, too, so usually aren't looking to bring on any additional employees. They might fill in some holes in the company, but that's about it.

I did read your post. You didn't read mine. And I think if you understood economics better you would have a better grasp. If the market exists, those 80k employees would eventually all get picked up. The fact that other carriers are trying to cut costs is indicative of the existing price structure not supporting demand. Which really means supply outstrips demand. So why should someone else have to support those 80k employees through artificial means?

Quoting BMI727 (Reply 52):
Quoting redflyer (Reply 43):
It would be better, in my opinion, to let the organization default and go into liquidation.

...which is exactly what happens if a plan cannot be made to reorganize. Chapter 11 doesn't bail out a company or fix anything about them, it just buys time to maybe fix things.

I understand what CH 11 does. What I've said is it treats creditors and suppliers differently and in some industries (e.g., airlines) gives the BK company a leg up on the competition. What is wrong with just letting the company liquidate?

Quoting BMI727 (Reply 52):
Quoting redflyer (Reply 43):
Once that is done, if there are competitors that were in the same situation then they suddenly have a disadvantage. Why?

Because their costs are too high to allow them to make a profit.

So why should one be given an advantage and not all?

Quoting UALWN (Reply 56):
Quoting mayor (Reply 54):
They've ALL fallen on hard times, but they've managed, thru Ch 11, to survive,

Thereby exacerbating the chronic overcapacity of the industry as a whole.

  

Quoting mpdpilot (Reply 58):
In any other industry I would say you are totally right. In the airline industry with seniority being the driving factor, I would say you are dead wrong. Even if the employees get jobs at other carriers, because it went into liquidation, they would likely just be stapled on the bottom of the seniority list of the surviving carriers. So now in addition to loosing their pensions, now they are also taking upwards of a 50% pay cut.

Ok, but that is the free market system at play here. Can someone tell me where it's guaranteed by law that no one loses their paygrade in our economic system? And in an industry that is rife with copious examples of mergers, acquisitions, and, yes, BK, where entire groups of employees lose seniority in one fell swoop, can anyone really say losing seniority is not something that will be encountered in a 20 or 30 year career? Does anyone really join the ranks of airline employees expecting a nice smooth ride during the next 20 or 30 years without any obstacles getting in the way? Really?

Quoting PSU.DTW.SCE (Reply 79):
Textbook economic theory sounds good in practice, but in reality it does not always work that way due to an inability for all variables to react instantainously.

The challenge with an airline is that there are high fixed costs and numerous long term obligations necessary to run an airline. Meanwhile demand and a significant portion of cost (fuel) are controlled by external factors. An airline cannot always adjust its cost base to align with revenue with demand fluctuates.

Your observation is kind of skewed because it does not in fact paint a portrait of true economic theory in a free market system. In a free market system demand is a variable based, in part, on unforeseen or uncontrollable factors. The key to survival is being able to adjust your supply to those fluctuating demands. (By the way, inability to adjust supply to meet increased demand can be just as much of a poison pill to a company as inability to reduce supply to decreased demand.) Airlines do have high fixed costs, but that does not mean they cannot weather fluctuations in demand. The key to survival in the airline industry is being adept at controlling those high costs, which means BK does not have to be a management tool to survival. I would say the airline industry in the U.S. would have been far better off had airlines been forced to liquidate instead of reorganize. The market would have achieved equilibrium far faster. And while the average ticket price might have been higher today, the industry as a whole would have been more stable.



I'm not a racist...I hate Biden, too.
User currently offlineuALWN From Andorra, joined Jun 2009, 2671 posts, RR: 2
Reply 93, posted (1 year 5 months 2 days 21 hours ago) and read 4886 times:

Quoting brilondon (Reply 91):
The court makes it the rules on how the debt is repaid, and yes they do sometimes with the secured creditors approval have some of that debt forgiven.

Some of the debt to secured creditors is forgiven indeed. What happens to the debt to unsecured creditors?



AT7/111/146/Avro/CRJ/CR9/EMB/ERJ/E75/F50/100/L15/DC9/D10/M8X/717/727/737/747/757/767/777/AB6/310/319/320/321/330/340/380
User currently offlinetdscanuck From Canada, joined Jan 2006, 12709 posts, RR: 80
Reply 94, posted (1 year 5 months 2 days 20 hours ago) and read 4883 times:

Quoting FlyingAY (Reply 85):
Do you think that the demand for air travel would disappear if UA/AA/DL went bankcrupt? No, it wouldn't. And in a free market the existing players and new entrants to the market would come in to fill this demand.

But the fact that the demand wouldn't disappear is exactly the problem. There isn't enough slack capacity in the market to absorb the demand of a UA/AA/DL liquidation as a step change. It would take, at best, 6 months for the other carriers to integrate the lost assets into their systems and bring that service back. That means airfares would shoot through the roof at the liquidation because demand would abruptly and grossly outstrip supply.

The total societal cost would be *far* higher than if you let the airline in Ch.11 continue to operate.

Quoting FlyingAY (Reply 85):
Wouldn't this be a good thing in a free market? If there are some employees/equipment that makes it impossible to run a profitable business, through bankrupcy the industry would get rid of these.

What are you going to do, shoot the people and landfill the equipment? The assets and people still exist after Ch.7, they don't disappear. They need to be taken care of. If the people don't find work they end up on government support, the assets can't just sit on the ramp blocking gates, they need to be moved (and maintained if any value is to be recovered).

Tom.


User currently offlineuALWN From Andorra, joined Jun 2009, 2671 posts, RR: 2
Reply 95, posted (1 year 5 months 2 days 20 hours ago) and read 4875 times:

Quoting tdscanuck (Reply 94):
But the fact that the demand wouldn't disappear is exactly the problem. There isn't enough slack capacity in the market to absorb the demand of a UA/AA/DL liquidation as a step change. It would take, at best, 6 months for the other carriers to integrate the lost assets into their systems and bring that service back. That means airfares would shoot through the roof at the liquidation because demand would abruptly and grossly outstrip supply.

Is that what happened when EA or PA disappeared? As mentioned above, Ansett disappeared and Virgin Australia took its place presto, in a more efficient way. Just earlier this year, Spanair, largest operator in my home airport, went under. Within weeks, FR, U2 and, especially, VY had taken care of business. Again more efficiently. No big deal. Survival of the fittest. Not of the fattest.



AT7/111/146/Avro/CRJ/CR9/EMB/ERJ/E75/F50/100/L15/DC9/D10/M8X/717/727/737/747/757/767/777/AB6/310/319/320/321/330/340/380
User currently offlinebrilondon From Canada, joined Aug 2005, 4059 posts, RR: 1
Reply 96, posted (1 year 5 months 2 days 20 hours ago) and read 4860 times:

Quoting uALWN (Reply 93):
Some of the debt to secured creditors is forgiven indeed. What happens to the debt to unsecured creditors?

As unsecured creditors the courts will determine how much they will receive in terms of monetary compensation if any, that is why they are called unsecured creditors. The unsecured creditors would know this going in, and if they didn't then they need to hire me to help them get the most of what they still have left. Note to the mods, this is by no means a plug, please do not delete.



Rush for ever; Yankees all the way!!
User currently offlineuALWN From Andorra, joined Jun 2009, 2671 posts, RR: 2
Reply 97, posted (1 year 5 months 2 days 19 hours ago) and read 4835 times:

Quoting brilondon (Reply 96):
As unsecured creditors the courts will determine how much they will receive in terms of monetary compensation if any

So indeed by going through Ch. 11 the company will shed a substantial amount of debt, which was my point.

Quoting brilondon (Reply 96):
The unsecured creditors would know this going in

Unsecured creditors are just creditors who don't hold any collateral. Suppliers, for instance.



AT7/111/146/Avro/CRJ/CR9/EMB/ERJ/E75/F50/100/L15/DC9/D10/M8X/717/727/737/747/757/767/777/AB6/310/319/320/321/330/340/380
User currently offlineCubsrule From United States of America, joined May 2004, 22319 posts, RR: 20
Reply 98, posted (1 year 5 months 2 days 14 hours ago) and read 4752 times:

Quoting uALWN (Reply 86):
Are you telling me that AA were close to insolvency and that's why they filed for Ch. 11? That would be rather naive, I think.

If they were not insolvent, why has their petition not been dismissed? The idea that a company that is not insolvent is absurd if you know anything about the Bankruptcy Code.

Quoting redflyer (Reply 92):
What I've said is it treats creditors and suppliers differently and in some industries (e.g., airlines) gives the BK company a leg up on the competition.

Well, sort of. In a business bankruptcy, creditors are primarily treated differently based on whether - and to what extent - they are secured. But that's not a C11-specific thing.



I can't decide whether I miss the tulip or the bowling shoe more
User currently offlineuALWN From Andorra, joined Jun 2009, 2671 posts, RR: 2
Reply 99, posted (1 year 5 months 2 days 14 hours ago) and read 4751 times:

Quoting Cubsrule (Reply 98):
If they were not insolvent, why has their petition not been dismissed?

Because it looks insolvent. Any accountant who doesn't know how to make the numbers look bad (or good) should be fired on the spot.



AT7/111/146/Avro/CRJ/CR9/EMB/ERJ/E75/F50/100/L15/DC9/D10/M8X/717/727/737/747/757/767/777/AB6/310/319/320/321/330/340/380
User currently offlineCubsrule From United States of America, joined May 2004, 22319 posts, RR: 20
Reply 100, posted (1 year 5 months 2 days 14 hours ago) and read 4745 times:

Quoting uALWN (Reply 99):
Because it looks insolvent.

What test would you suggest for insolvency?



I can't decide whether I miss the tulip or the bowling shoe more
User currently offlineuALWN From Andorra, joined Jun 2009, 2671 posts, RR: 2
Reply 101, posted (1 year 5 months 2 days 13 hours ago) and read 4715 times:

Quoting Cubsrule (Reply 100):
What test would you suggest for insolvency?

I have no idea. AA has been mulling for years whether it was in their best interest or not to file for Ch. 11. Finally they did. Insolvency had little (if anything) to do with the decision.



AT7/111/146/Avro/CRJ/CR9/EMB/ERJ/E75/F50/100/L15/DC9/D10/M8X/717/727/737/747/757/767/777/AB6/310/319/320/321/330/340/380
User currently offlineCubsrule From United States of America, joined May 2004, 22319 posts, RR: 20
Reply 102, posted (1 year 5 months 2 days 13 hours ago) and read 4695 times:

Quoting uALWN (Reply 101):
I have no idea.

It's easy to complain when you have no solutions . . .



I can't decide whether I miss the tulip or the bowling shoe more
User currently offlinebrilondon From Canada, joined Aug 2005, 4059 posts, RR: 1
Reply 103, posted (1 year 5 months 2 days 12 hours ago) and read 4668 times:

Quoting uALWN (Reply 99):
Because it looks insolvent. Any accountant who doesn't know how to make the numbers look bad (or good) should be fired on the spot

A good accountant only reports the numbers as he gets them. They don't make the numbers look anything but what they are. I don't really understand what you are saying or are you saying that accountants can make losses look like profits? That is illegal and they would be putting their license to be an accountant in jeopardy.

Quoting uALWN (Reply 101):

Quoting Cubsrule (Reply 100):
What test would you suggest for insolvency?

I have no idea. AA has been mulling for years whether it was in their best interest or not to file for Ch. 11. Finally they did. Insolvency had little (if anything) to do with the decision.

And here lies the truth. How do you know that they have been mulling over as you say filing for Ch. 11. They were able to keep out of bankruptcy which means going to court and having your books audited and your entire operation turned inside out to find savings and then allow the company to restructure accordingly.



Rush for ever; Yankees all the way!!
User currently onlineBMI727 From United States of America, joined Feb 2009, 15499 posts, RR: 26
Reply 104, posted (1 year 5 months 2 days 11 hours ago) and read 4631 times:

Quoting uALWN (Reply 86):
One thing is convincing them of investing in your company, another thing is convincing them of letting you off the hook of your debts and obligations, in the process screwing your employees and your stockholders, among others.

It's convincing them that the reorganization plan is viable and will leave them better off than they would be with a liquidation. Either way, you're selling private entities on the company.

Quoting redflyer (Reply 92):
What I've said is it treats creditors and suppliers differently and in some industries (e.g., airlines) gives the BK company a leg up on the competition.

More likely evens things up, since if you're just looking to get a leg up Chapter 11 is a really expensive way to do it.

Quoting uALWN (Reply 101):
AA has been mulling for years whether it was in their best interest or not to file for Ch. 11.

If Chapter 11 is a Get Out of Jail Free card and an unfair way to gain an advantage in the marketplace, what the hell was AA considering during the long period when they didn't declare bankruptcy, even after virtually all of their competitors had done it? If bankruptcy is the secret weapon for getting ahead that you say it is, the decision should have been clear cut years ago.



Why do Aerospace Engineering students have to turn things in on time?
User currently offlineLufthansa From Christmas Island, joined May 1999, 3197 posts, RR: 10
Reply 105, posted (1 year 5 months 2 days 9 hours ago) and read 4570 times:

Quoting tdscanuck (Reply 94):
But the fact that the demand wouldn't disappear is exactly the problem. There isn't enough slack capacity in the market to absorb the demand of a UA/AA/DL liquidation as a step change. It would take, at best, 6 months for the other carriers to integrate the lost assets into their systems and bring that service back. That means airfares would shoot through the roof at the liquidation because demand would abruptly and grossly outstrip supply.

The total societal cost would be *far* higher than if you let the airline in Ch.11 continue to operate.
Quoting BMI727 (Reply 104):
f Chapter 11 is a Get Out of Jail Free card and an unfair way to gain an advantage in the marketplace, what the hell was AA considering during the long period when they didn't declare bankruptcy, even after virtually all of their competitors had done it? If bankruptcy is the secret weapon for getting ahead that you say it is, the decision should have been clear cut years ago.

It's not a get out of jail free card for the existing shareholders, they lose everything almost every time. It is however a get out of jail free card for people who extended too much credit, for staff who may have not been realistic about conditions( i'm thinking things like scope clauses here that prevented suitable aircraft being operated mainline) , for middle level management who pushed perhaps unsuitable work practices because it was easier than change, and for upper level management who figured they would agree now to whatever conditions then 'knife' their unions in the back in bankruptcy. All of these kinds of behaviour are people NOT WORKING TOGETHER on the common goal and both labour and management are guilty. However if they all knew, that 100% of them would all be gone if they continued down that path, you'd start seeing them talk to each other and co-operate far more sensibly. I'm thinking things like the scope clauses. There never should have been the situation with the skies in north America got flooded with 50 CRJ's etc when the appropriate aircraft would have been something the size of the dc-9-30. That something should have been operated in house not subbed out to regionals. When oil shot up it turned out to be a disaster, and passengers largely detest the things, especially over longer routes. Except the fact people wouldn't work together on the common goal... meant the situation has still not really been addressed properly. Delta, with its 717 purchase, seems to be the closets to addressing that issue but that is just one of hundreds that compound.

And the reason for AA not doing it, is they were the last trying to be responsible to what should have been their first concern. Delivering the company's owners a return on their investment, that is, the capital they put in place to make sure there is a company in the first place. If anybody has been badly damaged and hardly done by through this whole situation, it's AA. because there have been so many bankruptcies, lets say we said no more around the year 2000. If UAL had failed in say 2002 (I was really trying not to use real companies here because people have an emotional attachment to brands and it blurrs them seeing the economics because of the love of the company). AA would have expanded massively at ORD. It would have quickly re jigged. Other carriers would have upgaged their ORD flights both long and short haul. AA then would have moved out of a position of strength at ORD it previously didn't enjoy, but prices wouldn't get too much higher, as Southwest would be still keen on getting part of the action at MDW.

To the people who said earlier if a major failed it wouldn't happen, well no US major controls nearly 50% of the market, but that is exactly what happened when Ansett failed in the Australian situation. Overnight it knocked out nearly 50% of the market. But we saw very quick changes made within a week. Firstly, older 747-300s were quickly redirected from international to domestic, freeing up 767s that were flying to Perth and Cairns (longer domestic legs) to be places on the shorter sectors on the east coast. Then we saw Ansett's 767-300s get picked up short term by QF. QF then wetleased aircraft from both Air Canada and Air new Zealand. We had Canadian 767s flying Trans tasman to free up the domestic part. Virgin then picked up some 737-300s from Ansett (not many though there weren't in the best condition) but then leased a whole stack of 737-400s from Virgin Express which was struggling and certainly didn't need the capacity. At the same time it placed a large order at boeing. For about the 3 weeks it took to get most of this into action, there was no heavily discounted tickets in the market, but, the market did return to normal after that, just the deepest of the discounts were missing. However it wasn't to stay like that. Virgin saw the once in a lifetime opportunity to step up and take over from Ansett, and very quickly ordered 50737NG's. Qantas has an equity raising issue, and issued more stock raising several hundred million and also placed a large 737-800 order. As both of these came online, the Canadian and ex Ansett aircraft left Australia. It didn't take very long at all. But it left Australia with a much simplier, more efficient and streamlined marketplace. Qantas was forced to change the way it operated domestically. It moved to LCC' style one way pricing for instance. Most of its flights between Brisbane and Sydney were previously 737s, and they were now upgaged to the 767 and the cityflyer shuttle service between the major capitals was born. Canberra-Brisbane and Canberra to Melbourne were previously BAe146 destinations. Now they were upgaged to the far more efficient and appropriate 737-400. Decreasing CASM. Virgin of course entered this market, but not at the same rate which kept prices in check. Many Ansett 737 pilots got offered jobs at virgin. They after all needed new pilots in a hurry, these guys didn't need much training and they were there ready to go as fast as Virgin could bring 737-400s into Australia. Which looking back was very very fast. As I said it happened in a matter of weeks. With this new more efficient market structure, the market grew considerably.

You see unlike when say a car marker goes broke, a new factory would need to be built, or that old one bought buy another company before that capacity could be replaced. But an airplane is a highly mobile form of capital. It can within a matter of days be based in Iceland, then move all the way to Australia. Not too many industries can you do that. Which means in the advent of a failure being a market correction, it is actually one of the fastest industries to be able to recover. Sure there is extensive training and support required. But that takes a lot less time then say, building a new hotel or factory or shopping centre. Now if you look at the American situation. No carrier controlled as much of the market as Ansett Did. The impact on the US market wouldn't be as dramatic. (lets say AA goes under) Sure the fleet number is bigger, but you'd see things change straight away. Like for Example. AF would change many of its USA 772 or A332 flights to 747s and A380s, redirecting part of that capacity from other routes which, now thanks to a competitor pulled out of the market will be more lucrative. That would free delta up for example, to ugpage its JFK-LAX flights to more widebodies. You could probably then see delta swoop in on part of the AA fleet. Maybe even the MD-80 fleet if they could get them for a song (nobody else will want them so good chance of that) and use them until they can get new replacements. That kind of thing would happen, and it would happen fast, because if that demand is ignored, then another carrier will swoop in on the opportunity. You'd find DL would be able to make more with them in the mean time than AA did, because they would be enjoying higher yields now the deepest discounted part of the market would not be filling those seats, as at best, maybe 70% of the AA fleet capacity would be reinstated in the short term. But now the market changed and adjusted, in the medium term it would continue to grow, albeit in a much healthier and sustainable rate.


User currently offlineCubsrule From United States of America, joined May 2004, 22319 posts, RR: 20
Reply 106, posted (1 year 5 months 2 days 8 hours ago) and read 4556 times:

Quoting Lufthansa (Reply 105):
It is however a get out of jail free card for people who extended too much credit,

How? Can you point me toward a single C11 where all unsecured creditors recovered anything close to a hundred percent of what they were owed?

Quoting Lufthansa (Reply 105):
But an airplane is a highly mobile form of capital. It can within a matter of days be based in Iceland, then move all the way to Australia.

Sort of. But there are a lot of barriers that come from the highly regulated nature of the industry, like foreign ownership requirements and the difficulties of adding new types to the fleet.



I can't decide whether I miss the tulip or the bowling shoe more
User currently offlineLufthansa From Christmas Island, joined May 1999, 3197 posts, RR: 10
Reply 107, posted (1 year 5 months 2 days 8 hours ago) and read 4539 times:

Quoting Cubsrule (Reply 106):
How? Can you point me toward a single C11 where all unsecured creditors recovered anything close to a hundred percent of what they were owed?

I'm not concerned about the welfare of the unsecured creditors. Or the jobs of the current employees. I'm concerned about the jobs of the employees, the creditors at rival company's and the shareholders equity at rivals that this company about to go into Chap 11 (any competitor that may be at any point throughout it) that this company's reckless actions, and that may be from both Management and Labor being stuck in the past, are about to inflict on the other companies in the marketplace.

Quoting Cubsrule (Reply 106):
Sort of. But there are a lot of barriers that come from the highly regulated nature of the industry, like foreign ownership requirements and the difficulties of adding new types to the fleet.

If any major US carrier went under any of the better run competitors would have zero trouble securing leases, additional stock offerings and wetleasing to cover short term capacity. There has been plenty of examples of it happening right around the world from Qantas to TAM when competitors failed. In markets far far harder to raise money in that the USA. TAM for example all of a sudden flying MD-11s when they'd never ever touched a douglas product in their life and at that point where basically an exclusive airbus operator. And do you know how much harder it would have been for a Latin company to raise the cash? But the opportunity was there and a deal was done, and done fast.


User currently offlineCubsrule From United States of America, joined May 2004, 22319 posts, RR: 20
Reply 108, posted (1 year 5 months 2 days 8 hours ago) and read 4536 times:

Quoting Lufthansa (Reply 107):
I'm not concerned about the welfare of the unsecured creditors.

You said C11 gives creditors a free ride. That's not close to being true.

Quoting Lufthansa (Reply 107):
If any major US carrier went under any of the better run competitors would have zero trouble securing leases, additional stock offerings and wetleasing to cover short term capacity.

Where are the, say, 400 airplanes of excess mainline capacity that would magically come to the States? JJ isn't anywhere close to the same scale, nor is AN/QF.



I can't decide whether I miss the tulip or the bowling shoe more
User currently offlineLufthansa From Christmas Island, joined May 1999, 3197 posts, RR: 10
Reply 109, posted (1 year 5 months 2 days 7 hours ago) and read 4509 times:

Quoting Cubsrule (Reply 108):
Where are the, say, 400 airplanes of excess mainline capacity that would magically come to the States? JJ isn't anywhere close to the same scale, nor is AN/QF.

That's very easy. Let's say it was American. American's current fleet for a start. The lessors and receiver will want to off load them as fast as possible. In the case of a leased aircraft, that's easy they just cease them.

It's not the most reliable source but lets just take the quick wikipedia numbers.

Beoing 737-800 191 aircraft. That will be snapped up in a second, and all major players should have no
trouble supporting them. That so there is almost half of that number of aircraft taken. Demand for these would
be in a global market place. The receivers would be keen to place them in large batches so as not to flood the global
marketplace with 737-800s and reduce lease/sale prices. Southwest would be keen too and with a once and a lifetime opportunity to expand you may even see somebody like Jetblue or Virgin America consider them. It would be a case of who can get to talk to HSBC quick enough. That one would be a very quick deal, or very quick few deals. Maybe 70 to Delta, 70 to United that kind of thing. They will be competitive because they will want to move fast.

Then we look at 58 767-300s (the 200s would likely be scrapped). Once again they'd be snapped up very fast, no issues
there.

Then we look at 47 777-200ers. Shouldn't have any problem placing those either. With a major player out of the way, there would be increased demand for widebody capacity on other US carriers routes. Think 757 flights become 767 flights, 767 flights become 777 flights. Both Domestically and Internationally. I could see SFO/LAX-NYC quickly becoming an all 767-300 operation/A330 operation. With smaller cities previously served by regional jets now getting 737 service etc.

So right there we are now at just shy of 300 aircraft.

Now lets look at the big fleet. the MD-80s.
188 MD-80s. Delta would be the only likely customer here. If these are on the open market it would drive the price of an MD80 probalby down to something like $100 000, so the creditors and the lessors will not want that. They will be very very keen to do a deal. With Delta able to get them for relative song, it could take say 120 of them very quickly. Place them on short haul routes where the higher fuel consumption doesn't make as much difference to overall flight costs and the fact that they burn more fuel will be offset by the fact they got them for next to nothing. They'll get a refit. And now Boeing and Airbus would both be left with a major whole in their production lines, and they'd both be very keen to fill that with DL's order. So DL takes them, employs a lot of AA staff to run them (as they can be hired quickly) buys some of AA's assets to support it (creditors happy as they were the only likely customer for MD maintenance equipment, spares etc) and bingo, there is your 400 aircraft flying that replaced about 600. Yields are up, and all the existing players are profitable again.

The rest would be sold on the open market or for scrap. Notice i didnt include the 757 fleet? A lot of the routes they fly, weather down to latin America or across to europe or transcontinental would all need to be upgaged, hence the interest in AA's widebody fleet. Flights south going from DFW, would be quickly upgaged from both IAH and ATL for example. That kind of thing.


User currently offlineCubsrule From United States of America, joined May 2004, 22319 posts, RR: 20
Reply 110, posted (1 year 5 months 1 day 17 hours ago) and read 4387 times:

Quoting Lufthansa (Reply 109):
The lessors and receiver will want to off load them as fast as possible. In the case of a leased aircraft, that's easy they just cease them.

What you are missing is that no carrier has the employees to operate those aircraft. It's easy for DL or UA to acquire a bunch of 738s, but it takes time to get enough pilots and flight attendants qualified to work them (using UA/DL procedures, not AA procedures). AA pilots aren't an answer, at least in the current regulatory scheme.



I can't decide whether I miss the tulip or the bowling shoe more
User currently offlineLufthansa From Christmas Island, joined May 1999, 3197 posts, RR: 10
Reply 111, posted (1 year 5 months 1 day 15 hours ago) and read 4344 times:

Quoting Cubsrule (Reply 110):
It's easy for DL or UA to acquire a bunch of 738s, but it takes time to get enough pilots and flight attendants qualified to work them (using UA/DL procedures, not AA procedures). AA pilots aren't an answer, at least in the current regulatory scheme.

Several weeks difference training to meet operational requirements. FA's can be done in a week. Sure they won't know DL's full service standards but they'll be legal. You mix them with experienced DL crews while you're bringing them up to speed and presto, you're in business. It's been done before. Ansett had 150 aircraft, and at the time was something like the 12 largest carrier in the world. It's been done before. Also the US can allow foreign carriers long haul aircraft to be temporarily chartered to fill part of the gap during the transition process. Think for example of the 6 plus 747s/A380s QF has sitting at LAX all day every day.

If there are 737 fleet differences in terms of specifications, once again its a matter of a very short amount of ground school, but a 737 type rating is a 737 type rating and they are legally allowed to fly it. It's been done before, the reality is the "its too bigger of a disruption to the market' argument doesn't stack up.

In the mean time, say if you lost at most 1/3 of the markets capacity, essential business travel would well and truly still keep on going with the other 2/3s. (in the US marketplace its probably more like losing 20% if a major went). So the economy would still keep on ticking along just fine. It's the non essential leisure part that would be temporarily interrupted.


User currently offlineCubsrule From United States of America, joined May 2004, 22319 posts, RR: 20
Reply 112, posted (1 year 5 months 1 day 11 hours ago) and read 4270 times:

Quoting Lufthansa (Reply 111):
It's been done before, the reality is the "its too bigger of a disruption to the market' argument doesn't stack up.

What exactly does the market gain from spending the money transitioning that size of a fleet between carriers? It seems to me like all that changes is the elimination of a competitor, but if the capacity is absorbed, I don't see what that accomplishes.



I can't decide whether I miss the tulip or the bowling shoe more
User currently offlineLufthansa From Christmas Island, joined May 1999, 3197 posts, RR: 10
Reply 113, posted (1 year 5 months 1 day 9 hours ago) and read 4239 times:

Quoting Cubsrule (Reply 112):
What exactly does the market gain from spending the money transitioning that size of a fleet between carriers? It seems to me like all that changes is the elimination of a competitor, but if the capacity is absorbed, I don't see what that accomplishes.

First of all, not all the capacity is absorbed. It never is. There is a certain amount of over capacity. Next, consolidation of flights onto larger more cost efficient aircraft that have lower CASM. Take for example where you have two competing hubs, lets say IAH and DFW. Both of these cities are big cities and will always generate a lot of demand. But they don't have to be a hub. Just like Los Angeles, for various reasons, isn't a true hub for any one big carrier (though it does have carriers with very big operations there.)

So if we consider that by, for example, wiping out the DFW hub, but it remaining an important destination for the existing players (we could probably assume Delta and United would be the largest carriers there in such an event.)

Lets look at routes from SLC to DFW and IAH.
Currently, Delta Operates a lot of CRJ's on both routes, by all standards a relatively inefficient aircraft but the logic behind it has been issues with scope clauses. AA, feeding its hub manages the larger MD-80 to DFW and United Operates the 737 to IAH. Part of this traffic is O & D traffic. Part of it is leaving SLC to connect to 3rd destinations Via texas. Whiping out DFW would result in two things. Firstly the Delta flights to DFW would likely be upgaged, as most of the direct demand for flights to the area would now be going on Delta. That would bring a decrease in CASM and increase in the quality of the product offered and the ability of Delta to invest more in its offering. Prices would rise but not too much because Southwest will still be competing from Love Field. Next the United flights. Part of that traffic that was connecting VIA DFW will now go via IAH instead. That will enable UAL to either upgage or increase frequencies or both. And Ironically, Delta will probably also upgage, because Some of the traffic that would have flown XXX-DFW-IAH will now fly XXX-SLC-IAH. Lastly Delta's flights to other hubs from SLC such as ATL are likely to upgage as well as DFW does compete with ATL. DFW would still be left with plenty of service, most likely on larger aircraft, but it probably would lose service to some cities, Like Madrid for example, where it is probably heavily relying on DFW's status as a oneworld hub to make it work. It may however gain new service, Like a Delta flight for example to its Amsterdam hub to cater to European demand lost by American drawing down.

So in essence what the market gains is the ability to better much supply to demand, to consolidate flights bringing down CASM, and to, in the process wipe out bad business practices of the past, such as scope clauses preventing the right sized aircraft being operated on the right sized routes. This means the market gets closer to equilibrium. There are winners and losers of course. Lots of smaller cities would lose service to DFW. But they'd probably gain larger aircraft coming in from other hubs than they presently see and welcome the return of mainline service.


User currently offlineFlyingAY From Finland, joined Jun 2007, 698 posts, RR: 0
Reply 114, posted (1 year 5 months 1 day 3 hours ago) and read 4166 times:

Quoting tdscanuck (Reply 94):
What are you going to do, shoot the people and landfill the equipment? The assets and people still exist after Ch.7, they don't disappear. They need to be taken care of. If the people don't find work they end up on government support, the assets can't just sit on the ramp blocking gates, they need to be moved (and maintained if any value is to be recovered).

I talked about people and equipment that make it impossible to make a profit. If you have bad employees and big fleets of uneconomical planes, it would be better for the industry that this kind of company goes bankrupt, the competitors and new entrants hire the good ones among those employees and buys the equipment that is still relevant in the current era. Airline business is not a social security program, where everyone should be guaranteed a right to work. I seriosly doubt that any airline would be interested of a DC-9 if an airline flying such went bankrupt. Those would be likely scrapped and that would recover any value left in them. Bankruptcy helps the industry to renew.

People here talk like a Ch7 of a major airline would be end of the world - yet that has happened before throughout the world. And no employees were shot during the process or equipment landfilled - some scrapped maybe.


User currently offlineCubsrule From United States of America, joined May 2004, 22319 posts, RR: 20
Reply 115, posted (1 year 5 months 19 hours ago) and read 4085 times:

Quoting Lufthansa (Reply 113):
First of all, not all the capacity is absorbed. It never is. There is a certain amount of over capacity.

Your argument is that liquidation is good. It still does not necessarily follow that reorganization is bad. Most airline C11 proceedings in the past decade in the United States have resulted in significant capacity cuts. Why is a liquidation capacity cut better than a C11 capacity cut? With C11, the number of competitors remains higher, which economic theory - or at least the theory underlying competition law - generally regards as a good outcome.



I can't decide whether I miss the tulip or the bowling shoe more
User currently offlineLufthansa From Christmas Island, joined May 1999, 3197 posts, RR: 10
Reply 116, posted (1 year 5 months 5 hours ago) and read 3969 times:

Quoting Cubsrule (Reply 115):
our argument is that liquidation is good. It still does not necessarily follow that reorganization is bad. Most airline C11 proceedings in the past decade in the United States have resulted in significant capacity cuts. Why is a liquidation capacity cut better than a C11 capacity cut? With C11, the number of competitors remains higher, which economic theory - or at least the theory underlying competition law - generally regards as a good outcome.

because its not just a capacity cut but its a change in mindset. The new capacity comes from a different organisation with a different mindset, hopefully closer to what the market demands. That ranges from corporate culture, business practices, labor's culture and relationship with those businesses, market positioning etc. Look at the jetblue example. When it set up shop at JFK, There is no doubt it brought with it changes passengers wanted to see. So much so it forced delta to set up song. And even today, Delta are now doing things the market wants to see more so than most other carriers, largely due to the lessons learnt via song.

The argument that reorganisation is bad, is because it prevents those who are doing 'the right things' taking their rightful place and expanding in the market when those who do 'the wrong things' run out of cash. This current round of mergers is attempted to get the same result. But that result probably would have happened years earlier. I would argue, Continental, under Gordon B, if a major had gone would have massively expanded and been rewarded with it through pax loyalty. Instead they have merged, in a messy process. This current round of mergers is attempting to put the market where it should be, and reach some kind of equilibrium. But the natural way the market would have achieved that is the less well run would have been killed of and the better run expand, rather than merge. The current Delta does seem to be aware of this though, and is trying to implement those lessons it learned through song etc. I hope they all get it right because the culture of reorganisation has left a semi state of market failure happening for the last 20 years. The evidence of that is the financial health of the current system, the fact returns have been so ridiculously low and the inability of the market to get capacity to match demand.


User currently onlinepar13del From Bahamas, joined Dec 2005, 6738 posts, RR: 8
Reply 117, posted (1 year 4 months 4 weeks 1 day 22 hours ago) and read 3865 times:

Quoting Lufthansa (Reply 113):
First of all, not all the capacity is absorbed. It never is. There is a certain amount of over capacity. Next, consolidation of flights onto larger more cost efficient aircraft that have lower CASM.

I understand the entire post but my question is, where has this ever happened for it to be more than theory?
The EU does not have the frequency that the USA has, and since the USA has chpt.11 plus have had carriers fold - EA, Pan Am TWA - I do not believe that such has ever happened in reality. This larger more efficient a/c theory is recent and at present seems driven by out-siders on the cost of fuel. DL chpt.11 had changes in its scope clause in the works it has just taken time and I'm not sure the cost of fuel is the primary issue with them shutting down a number of their smaller RJ's, it is a factor I accept that.

IN time an independent regional may well operatr 737/A320 size a/c, and if their cost are lower than mainline they will be a candidate for outsourcing, then the seat numbers in the scope clause will become irrelevant and place the focus where squarely on cost.


User currently offlineCubsrule From United States of America, joined May 2004, 22319 posts, RR: 20
Reply 118, posted (1 year 4 months 4 weeks 1 day 20 hours ago) and read 3830 times:

Quoting Lufthansa (Reply 116):
So much so it forced delta to set up song. And even today, Delta are now doing things the market wants to see more so than most other carriers, largely due to the lessons learnt via song.

And yet, in the same time period, DL went through C11. Was Delta's C11 bad for the industry?



I can't decide whether I miss the tulip or the bowling shoe more
User currently offlinemayor From United States of America, joined Mar 2008, 9978 posts, RR: 14
Reply 119, posted (1 year 4 months 4 weeks 1 day 13 hours ago) and read 3754 times:

Quoting Lufthansa (Reply 107):
Or the jobs of the current employees.

Well, that's obvious as hell.

Quoting Cubsrule (Reply 118):
And yet, in the same time period, DL went through C11. Was Delta's C11 bad for the industry?

How true. No matter where the ideas originated, they would never have been implemented if it hadn't been for the bankruptcy. DL has emerged a much better carrier, BECAUSE of having gone thru it. If there was nothing available except liquidation, where would be the chance to be a better carrier? Sure, it's possible it could have happened without having to go thru BK, but it's also possible that the chance at reorganization was the catalyst needed to improve the airline.

Quoting Lufthansa (Reply 116):
The argument that reorganisation is bad, is because it prevents those who are doing 'the right things' taking their rightful place and expanding in the market when those who do 'the wrong things' run out of cash.

But, WHO, among the majors, WAS doing the "right things"? Seem to me that all of them were doing the "wrong things" and it takes something like a bankruptcy to set it right. It would be a shame for a carrier to get liquidated if it was possible for them to improve.



"A committee is a group of the unprepared, appointed by the unwilling, to do the unnecessary"----Fred Allen
User currently offlinekoruman From Australia, joined Feb 2006, 3528 posts, RR: 5
Reply 120, posted (1 year 4 months 4 weeks 1 day 10 hours ago) and read 3718 times:

America's Chapter Eleven is not a "Get Out of Jail Free" card.

It is a "Get Out of Jail While Remaining in Charge of the Company You Destroyed" card, which also comes with a handy "Rape Your Employees With Impunity" licence.

(Rape as economic rape - the wanton destruction of families who depend upon the income and healthcare provided by their employment contracts.)

Having watched a number of airline failures in Australia - including Ansett - I am astonished that US laws allow venal airline managers to steal their staff's entitlements (such as pensions and contracted working conditions) while remaining in power themselves and able to divert their employees' entitlements to themselves.

Personally, I think that any airline which has used Chapter Eleven to reduce its workers' conditions should be viewed as having admitted anti-competitive behaviour, and should be banned from operating to Europe or Australia.


User currently offlineCubsrule From United States of America, joined May 2004, 22319 posts, RR: 20
Reply 121, posted (1 year 4 months 4 weeks 1 day 10 hours ago) and read 3695 times:

Quoting koruman (Reply 120):
I am astonished that US laws allow venal airline managers to steal their staff's entitlements (such as pensions and contracted working conditions) while remaining in power themselves and able to divert their employees' entitlements to themselves.

Actually, that's not usually how it happens. Steven Wolf is out of aviation, and Doug Parker is in charge of US. Glenn Tilton is out of aviation, and Jeff Smisek is in charge of UA.

Quoting koruman (Reply 120):
Personally, I think that any airline which has used Chapter Eleven to reduce its workers' conditions should be viewed as having admitted anti-competitive behaviour, and should be banned from operating to Europe or Australia.

How is it anticompetitive in any legal sense of the word?



I can't decide whether I miss the tulip or the bowling shoe more
User currently offlinekoruman From Australia, joined Feb 2006, 3528 posts, RR: 5
Reply 122, posted (1 year 4 months 4 weeks 1 day 9 hours ago) and read 3679 times:

Quoting koruman (Reply 120):
Personally, I think that any airline which has used Chapter Eleven to reduce its workers' conditions should be viewed as having admitted anti-competitive behaviour, and should be banned from operating to Europe or Australia.
Quoting Cubsrule (Reply 121):
How is it anticompetitive in any legal sense of the word?

Because in the countries that I listed, an employment contract is binding upon both the employee and the employer and cannot be breached by the employer going into voluntary bankruptcy protection or the employee unilaterally seeking to vary the conditions.

So a US carrier whose management chooses a tactical Chapter Eleven to rape its employees and lower its costs is giving itself an artificial competitive advantage which its competitors from countries with more advanced employment rights cannot match.

This disadvantages the competitor which is honouring its contractual obligations, and delivers the market to the unscrupulous competitor which has elected to abuse bankruptcy law to rape its employees.


User currently offlineCubsrule From United States of America, joined May 2004, 22319 posts, RR: 20
Reply 123, posted (1 year 4 months 4 weeks 1 day 9 hours ago) and read 3677 times:

Quoting koruman (Reply 122):
Because in the countries that I listed, an employment contract is binding upon both the employee and the employer and cannot be breached by the employer going into voluntary bankruptcy protection or the employee unilaterally seeking to vary the conditions.

Your issue seems to be with employment at will, not with bankruptcy. In the sense in which you are describing it, C11 simply permits airline employers to act as most other employers of skilled workers can rather than be bound by the Railway Labor Act. Your premise is flawed, however, because U.S. bankruptcy law does NOT permit the unilateral abrogation of employment contracts.

Quoting koruman (Reply 122):
So a US carrier whose management chooses a tactical Chapter Eleven to rape its employees and lower its costs is giving itself an artificial competitive advantage which its competitors from countries with more advanced employment rights cannot match.

Let's go back to my question. You've explained how you believe "tactical C11" is anti-competitive in a general sense of the word. But in competition law, anti-competitive is a term of art, and I'd like to know which of the compeition law definitions of anti-competitive applies.

[Edited 2012-11-24 19:04:33]


I can't decide whether I miss the tulip or the bowling shoe more
User currently offlinetdscanuck From Canada, joined Jan 2006, 12709 posts, RR: 80
Reply 124, posted (1 year 4 months 4 weeks 1 day 8 hours ago) and read 3652 times:

Quoting koruman (Reply 122):
So a US carrier whose management chooses a tactical Chapter Eleven to rape its employees and lower its costs is giving itself an artificial competitive advantage which its competitors from countries with more advanced employment rights cannot match.

As soon as you start to do international comparison, US bankruptcy laws are hardly the gorilla in the room. Let's talk about freedom rights and route restrictions *long* before we say that Ch. 11 is giving US airlines a competitive advantage against international competitors.

Tom.


User currently offlineuALWN From Andorra, joined Jun 2009, 2671 posts, RR: 2
Reply 125, posted (1 year 4 months 4 weeks 16 hours ago) and read 3555 times:

Quoting BMI727 (Reply 104):
If Chapter 11 is a Get Out of Jail Free card and an unfair way to gain an advantage in the marketplace, what the hell was AA considering during the long period when they didn't declare bankruptcy, even after virtually all of their competitors had done it?

This is exactly what people here have been wondering for years! What the hell were they waiting for? I don't know. But at the end, they did it. Was the financial situation at AA significantly worse when they filed for Ch. 11, compared to, say, 2 years before? I don't think so.

Quoting Cubsrule (Reply 121):
Steven Wolf is out of aviation, and Doug Parker is in charge of US. Glenn Tilton is out of aviation, and Jeff Smisek is in charge of UA.

Tilton is the chairman of United Continental holdings. Hardly out of aviation.



AT7/111/146/Avro/CRJ/CR9/EMB/ERJ/E75/F50/100/L15/DC9/D10/M8X/717/727/737/747/757/767/777/AB6/310/319/320/321/330/340/380
User currently offlineCubsrule From United States of America, joined May 2004, 22319 posts, RR: 20
Reply 126, posted (1 year 4 months 4 weeks 15 hours ago) and read 3530 times:

Quoting uALWN (Reply 125):
Tilton is the chairman of United Continental holdings. Hardly out of aviation.

It's a nonexecutive position, isn't it?



I can't decide whether I miss the tulip or the bowling shoe more
User currently offlineuALWN From Andorra, joined Jun 2009, 2671 posts, RR: 2
Reply 127, posted (1 year 4 months 4 weeks 15 hours ago) and read 3502 times:

Quoting Cubsrule (Reply 126):
It's a nonexecutive position, isn't it?

In the airline industry...



AT7/111/146/Avro/CRJ/CR9/EMB/ERJ/E75/F50/100/L15/DC9/D10/M8X/717/727/737/747/757/767/777/AB6/310/319/320/321/330/340/380
User currently offlineCubsrule From United States of America, joined May 2004, 22319 posts, RR: 20
Reply 128, posted (1 year 4 months 4 weeks 15 hours ago) and read 3502 times:

Quoting uALWN (Reply 127):
In the airline industry...

No argument there.



I can't decide whether I miss the tulip or the bowling shoe more
User currently onlinepar13del From Bahamas, joined Dec 2005, 6738 posts, RR: 8
Reply 129, posted (1 year 4 months 4 weeks 15 hours ago) and read 3487 times:

Quoting uALWN (Reply 125):
What the hell were they waiting for?

Well I can think of two things why they delayed, they continued to negotiate with their employees while building enough cash on hand to ensure that if they did have to go chpt.11 they would be able to operate independently versus relying on some third party to finance their operations. In addition to having to convince a judge of their plan they would also have to meet the demands of their financier, this way there is one less party to satisfy.
The downside is that they really got rid of virtually everything they owned, it seems as if the power to make decisions in a company is more important than a company having assets.

Time will tell if this was a good strategy.


User currently offlinebrilondon From Canada, joined Aug 2005, 4059 posts, RR: 1
Reply 130, posted (1 year 4 months 4 weeks 14 hours ago) and read 3452 times:

Quoting Lufthansa (Reply 107):
that this company's reckless actions
Quoting koruman (Reply 120):
Personally, I think that any airline which has used Chapter Eleven to reduce its workers' conditions should be viewed as having admitted anti-competitive behaviour, and should be banned from operating to Europe or Australia.

What would htis accomplish? How would this be accomplished? I don't see the logic in this statement.

Quoting uALWN (Reply 125):
This is exactly what people here have been wondering for years! What the hell were they waiting for? I don't know. But at the end, they did it. Was the financial situation at AA significantly worse when they filed for Ch. 11, compared to, say, 2 years before? I don't think so.

Yes it was. They were able to stay out of bankruptcy by having enough cash on hand to cover the obligations of the company and be able to keep the employees working with out having to go through the expense of bankruptcy.



Rush for ever; Yankees all the way!!
User currently offlinebillreid From Netherlands, joined Jun 2006, 968 posts, RR: 0
Reply 131, posted (1 year 4 months 4 weeks 14 hours ago) and read 3435 times:

US CH11 is the purest form of Socialism in Communist America!
No other country allows companies to steal from the public, and other companies with Billions in the bank.

This is of course not my opinion because I live and work in the USA.

I comprehend the argument from foreign entities that have been stiffed multiple times by the likes of AA, UA, CO, NW, DL, US, TW, PA who have been granted the right not to pay their debts by a corrupt legal system that allows other companies to be put at risk by companies with billions in the bank such as AA today.

It could be looked at as nothing short of pure anti competitive government sanctioned subsidization. Why, because BA, AF, KL, LH don't have the option to restructure debts and contracts to get competitive advantage, do they????



Some people don't get it. Business is about making MONEY!
User currently onlinepar13del From Bahamas, joined Dec 2005, 6738 posts, RR: 8
Reply 132, posted (1 year 4 months 4 weeks 12 hours ago) and read 3407 times:

Quoting billreid (Reply 131):
I comprehend the argument from foreign entities that have been stiffed multiple times by the likes of AA, UA, CO, NW, DL, US, TW,

Not sure how they were stiffed, are you saying if DL and NW for example went Chpt.7 the USA investors would be lining up in the EU to invest in the likes of BA, AF etc.? Since service on foreign carriers on international flights is preferred to USA carriers how much business has BA lost to DL, any Brits abandoning BA for the new DL?
The companies who used to supply DL, NW and CO probably appreciate not having to downsize their business for months to a year or more while other carriers purchase planes, retrain crews to be able to pick up the slack on the domestic market, which is where the majority of the effect is felt since cabbotage is not an issue.

Quoting billreid (Reply 131):
It could be looked at as nothing short of pure anti competitive government sanctioned subsidization. Why, because BA, AF, KL, LH don't have the option to restructure debts and contracts to get competitive advantage, do they????

Well is it fair to say that they exist today in private form because when they were owned by their governments their debts and poor business decisions were forgiven by the tax payors who had no say whatsoever, at least in following the USA model of private ownership, they have relieved the tax payors of the burden and passed it on like in the USA to private individuals.

Bottom line is that the USA as a country have their laws and other countires theirs, since the majority of Europeans for example are not flying on DL, CO or AA who cares, or do we somehow believe that if DL, NW and AA went under that the USA government would turn to BA or AF for assistance, when WN, F9 and other local carriers are available?


User currently onlineBMI727 From United States of America, joined Feb 2009, 15499 posts, RR: 26
Reply 133, posted (1 year 4 months 4 weeks 12 hours ago) and read 3402 times:

Quoting Lufthansa (Reply 105):
However if they all knew, that 100% of them would all be gone if they continued down that path, you'd start seeing them talk to each other and co-operate far more sensibly.

...which is exactly what they do to keep Chapter 11 from becoming Chapter 7. All Chapter 11 does is ensure that there's something to work with.

Quoting Cubsrule (Reply 106):
Can you point me toward a single C11 where all unsecured creditors recovered anything close to a hundred percent of what they were owed?

If there was money for that, there wouldn't be a bankruptcy.

Quoting uALWN (Reply 125):
What the hell were they waiting for?

Burning money and trying solutions that would preserve more value for shareholders. If Chapter 11 were a free pass, they would have done it long ago.

Quoting billreid (Reply 131):
US CH11 is the purest form of Socialism in Communist America!

That makes me think that you don't know what socialism is.

Quoting billreid (Reply 131):
No other country allows companies to steal from the public, and other companies with Billions in the bank

Of course there are plenty of government owned airlines that burn money like it's going out of style.



Why do Aerospace Engineering students have to turn things in on time?
User currently offlinetdscanuck From Canada, joined Jan 2006, 12709 posts, RR: 80
Reply 134, posted (1 year 4 months 4 weeks 11 hours ago) and read 3376 times:

Quoting billreid (Reply 131):
No other country allows companies to steal from the public

Please, please tell me that's sarcasm. Do you have any idea how corrupt the aviation/government relationship is in most countries?

Tom.


User currently offlineuALWN From Andorra, joined Jun 2009, 2671 posts, RR: 2
Reply 135, posted (1 year 4 months 3 weeks 6 days 17 hours ago) and read 3210 times:

Quoting BMI727 (Reply 133):
If Chapter 11 were a free pass, they would have done it long ago.

It is certainly not a free pass for shareholders! Quite the opposite!



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