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Do Accidents = Bankruptcy?

Fri Mar 19, 2004 9:53 am

Good day, folks. I’m about to start my master’s thesis on the correlation between major airline accidents and post-accident market share and profitability. Specifically, I’m researching airlines that have suffered major accidents to see if there is a link between the bad press and public uncertainty, and the eventual demise of the carrier. A good example would be ValuJet’s inability to recover following the crash of Flight 592.

If anyone would like to share their thoughts on this subject, or if you can provide other examples of airlines that’ve collapsed in the wake of a major accident, I would be extraordinarily grateful.

Thanks for your time.
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RE: Do Accidents = Bankruptcy?

Fri Mar 19, 2004 9:59 am

A classic example:

Pan American World Airways was beginning to turn things around in late 1987/early 1988. Its flagship 747 fleet was undergoing a massive refurbishment program, and bookings were up all across the route system. There was talk of a small profit by the end of 1988.

That all changed with the bombing of flight 103 in December of 1988. Bookings dropped like a rock system wise. All the progress the comapny had made went down the drain. Some say that the tragic end of flight 103 was what ultimetely put Pan Am under. Of course, years and years of mismanagement took its toll on the one proud airline. 103 was the final turn in the screw so to speak.

A sad end to such a great airline.

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RE: Do Accidents = Bankruptcy?

Fri Mar 19, 2004 10:00 am

I would have to yes, I mean just look at the two biggest examples: Pan Am and TWa. After Lockerbie, Pan Am was devastated and everyone i guess feared flying them. Same thing with Twa after the crash off long island
Don't let the truth get in the way of a good story
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RE: Do Accidents = Bankruptcy?

Fri Mar 19, 2004 10:06 am

Couldn´t agree more with you guys. Some examples? Taesa, ValueJet, PanAm, Twa, Swissair.
Nevertheless, Air France, Singapore, Korean Air, Japan Airlines, and many others have had major mishaps and are still doing fine!!
Vive la France! ¡Viva México!
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RE: Do Accidents = Bankruptcy?

Fri Mar 19, 2004 10:16 am

If you have badly run airline like TWA and PAN AM the answer is YES.

Airlines like Korean Air and China Airlines have crashed more planes then I can name but they are doing great! What about SQ, they had a major crash and various minor accidents but they are also doing fine, so the answer is NO.
Bush, your a sad, sad man.
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RE: Do Accidents = Bankruptcy?

Fri Mar 19, 2004 10:19 am

I think you can cite many examples on either side of the argument. I suspect that what you will find if you were to examine the financials of those airlines that survived and those that didn't you will find that those that didn't survive were in much worse financial shape that those that did. A good airline that is well managed expects a crash will eventually happen and will have funds to cover their liability, but if they are operating on a very thin margin, as airlines often do even in the best of times, then the expected loss of revenue from a drop in market share combined with not having the funds available to cover liability incurred from the crash.

Consider two examples. Valuejet was in scary financial condition and got shut down by the government which lead it to fold and re-incarnate as Air Tran. Alaska had a crash in 2000 which created a lot of government scrutiny and remains strong to this day and has had a growth cycle during the last couple of years.


SEA No other place like it
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RE: Do Accidents = Bankruptcy?

Fri Mar 19, 2004 10:21 am

Valujet never went into bankruptcy, they were on the brink a few times as a result of 592, but never filed for bankruptcy. The merger with AirTran was just to get away from the image the Valujet name had taken on as a result of the crash.
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RE: Do Accidents = Bankruptcy?

Fri Mar 19, 2004 10:33 am

I think another good example would be Fine Air of Miami. This is one of the more unfortunate coincidences of aviation. The day (maybe the day after) the company went public there was that awful crash after the plane was improperly loaded and it collided with a building on the airport's perimeter and the pilots and some bystanders died. From then on, they obviously went into a financial downspin and then merged with Arrow Air of Miami and now they are in bankruptcy as well...
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RE: Do Accidents = Bankruptcy?

Fri Mar 19, 2004 10:52 am

Also, Air Florida practically shut down after Palm 90 crashed in the Patomic River
Made from jets!
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RE: Do Accidents = Bankruptcy?

Fri Mar 19, 2004 10:53 am

I'd have to say no... accidents do not equal bankruptcy.... US Air (US Airways) had 5 crashes:

September 1989 - LaGuardia
February 1991 - Los Angeles
March 1992 - LaGuardia
July 1994 - Charlotte
September 1994 - Pittsburgh

They had all those crashes (2 just two months apart) and didn't file Chapter 11 until 2002...
You can't fix stupid.... - Ron White
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RE: Do Accidents = Bankruptcy?

Fri Mar 19, 2004 10:54 am

L'Express, a regional carrier which flew Beech 1900's in Alabama, Louisiana, and Texas during the late 80's/early 90's. One of their 1900's went down while enroute from MOB to BHM. The airline never recovered from that. I have a picture of one of their purple, green, and gold aircraft hanging up in my room actually.

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RE: Do Accidents = Bankruptcy?

Fri Mar 19, 2004 11:03 am

I think that it may have to do with the size of the carrier, the financial backing of the airline. If you were working for an airline on it's last legs, that an accident would not help the situation.
Made from jets!
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RE: Do Accidents = Bankruptcy?

Fri Mar 19, 2004 11:12 am

As someone's already mentioned - Air Florida flight 90.

I read that the accident was supposed to have cost Air Florida 100,000 reservations - probably because it was highly publicised at the time. The airline went under in 1984.

It wasn't the only reason they went under, but it didn't help...


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