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davidjohnson6
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Relatively few bankruptcies so far

Tue Jul 14, 2020 2:13 pm

Wikipedia has a reasonably comprehensive list of airlines which have ceased operations each year - you can find the list for 2020 at
https://en.wikipedia.org/wiki/Category: ... ed_in_2020
I know wikipedia isn't 100% reliable, but it is free and most serious errors get corrected in time - it's rare that a major error is left for a year or longer

The last 4 months have been awful for airlines, yet relatively few airlines have formally shut down, compared to previous years, particularly compared to the 2008-2010 recession. They may have put many aircraft in storage, laid off lots of staff, but the airlines still live (albeit hibernating sometimes)
The outlook for commercial aviation over the next 12 months is poor - very few people seem to expect a revival to 2019 levels of demand until 2021 at the very earliest and more like 2023 in some cases.

I know there has been Govt subsidy, but these have been granted to only the largest and most strategic of airlines. Many smaller airlines have had to cope without taxpayer cash.
Anyone have thoughts as to why so many airlines, both large and small, cling on in the hope of revival ?

Note - I'm not aiming for a discussion around any particular airline - the aim is to look at the overall picture of number of airlines which have decided to close

For reference, the number of airlines shutting down in previous years is
2008 134
2009 98
2010 105
2011 82
2012 95
2013 77
2014 53
2015 63
2016 52
2017 57
2018 73
2019 49
2020 24 after 6 months
 
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Polot
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Re: Relatively few bankruptcies so far

Tue Jul 14, 2020 2:18 pm

Governments have been bailing out their airlines stalling and/or preventing official bankruptcy/shutdown.

That is why the number is low for now.
 
Exeiowa
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Re: Relatively few bankruptcies so far

Tue Jul 14, 2020 2:29 pm

Banks and leasing companies have been slow to pull the plug because the seized assets cannot be reallocated easily.

Plus the crises has been a quick one, with a rapid plunge down rather than a steady worsening, takes longer to wrinkle out the failures. If you look across Europe and US airlines are no much larger entities created from many smaller one, so fewer total airlines and have more available resources up front.
 
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Revelation
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Re: Relatively few bankruptcies so far

Tue Jul 14, 2020 3:50 pm

davidjohnson6 wrote:
Anyone have thoughts as to why so many airlines, both large and small, cling on in the hope of revival ?

Because all the people working for the company have no interest in going through bankruptcy. Maybe outside consultancies and lawyers make money on the endevour, but no one else will. In fact a lot will lose large percentages of their net worth if the stock becomes worthless, and a lot will lose their jobs, which is a big deal if you work in an industry where seniority determines a large part of your pay and benefits.

The company executives are there to work for the current stockholders, not the future ones who gain control via bankruptcy. In the end the decision really only happens when there is no way to fund the company's operations. Till that happens it literally is their job to keep the company going.

It's kind of surprising how often the "why don't they just go through bankruptcy" question pops up here on a.net. If you ever go through one or are close to someone who has, I don't think you'll ask ever again.
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MIflyer12
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Re: Relatively few bankruptcies so far

Tue Jul 14, 2020 3:54 pm

Apart from those issues, the OP's contention is relying on correct, contemporaneous reporting by Wikipedia. Some really narrow, niche topic articles have very few contributing authors. It's probably a fairly short list of people (select staff at Boeing, Airbus, leasing companies) who could authoritatively provide a list, and they're too busy to update Wikipedia.
 
davidjohnson6
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Re: Relatively few bankruptcies so far

Tue Jul 14, 2020 4:03 pm

No company director ever wants to go through bankruptcy, but in many countries the law typically says that if a company has more liabilities than assets and has no credible hope of paying its bills, and chooses not to declare some sort of bankruptcy event, then the directors have some degree of personal liability in the courts - i.e. sufficiently concerning for directors not to want to put their personal assets at risk or face penalties from the courts for ignoring the interests of creditors

I've set up my own company in the past, and had to shut it down years later. Right now if I was running a small airline that my Govt did not consider to be strategic, and seeing the company's cash reserves disappear fast, I would be wondering if the company really could survive and whether it's maybe time to just stop while you still can without personal liability
 
ltbewr
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Re: Relatively few bankruptcies so far

Tue Jul 14, 2020 4:08 pm

Those that filed for Bankruptcy/Premiership so far were very likely had way too much debt, poor financial structures, weak business plans that were easily destroyed by the pandemic, weak government support/bailouts, lacked strong connections with key politicians.
 
Miamiairport
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Re: Relatively few bankruptcies so far

Tue Jul 14, 2020 4:36 pm

As the previous decade showed airlines don't die very easily. There are many interested parties not to mention the airline's management that have zero desire to see an airline liquidate. Suppliers will bend over backwards to keep an airline in business. As noted governments have stepped in to help the airlines try to weather this storm but it's looking bleak again. Remember airlines can use the Chapter 11 process to shed debt and unprofitable assets/operations, force pay cut and redo contracts. At this point other than a few small airlines (at least here in the US) I don't see any airlines going out of business. I could see some possible shotgun marriages allowed and financed by the Fed. Similar to what the Fed originally tried to do with Banks in 2008.
 
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nighthawk
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Re: Relatively few bankruptcies so far

Tue Jul 14, 2020 4:50 pm

Wait until next year. Governments will be ending their furlough schemes by the end of this year, at which point labour costs will go through the roof. Coupled with lower than normal demand over the winter, and you'll find a lot of airlines very quickly burning through their government backed loans and declaring bankruptcy. Early next year is going to be a bloodbath.
 
TYWoolman
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Re: Relatively few bankruptcies so far

Tue Jul 14, 2020 6:40 pm

Also...the industry is in shock and whatsmore can't predict a recovery or vaccine success. Going into bankruptcy too soon amid a recovery can make for unwanted courtships, too. Bankruptcies will happen when all are ready to tango.
 
FlyingElvii
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Re: Relatively few bankruptcies so far

Tue Jul 14, 2020 6:46 pm

nighthawk wrote:
Wait until next year. Governments will be ending their furlough schemes by the end of this year, at which point labour costs will go through the roof. Coupled with lower than normal demand over the winter, and you'll find a lot of airlines very quickly burning through their government backed loans and declaring bankruptcy. Early next year is going to be a bloodbath.


THIS.....

Most US companies but for a few like Southwest, are planning for around 50% of last year this winter, and HOPING that is enough cutting.
No good answers to anything right now, for anyone in transportation that is not directly gov subsidized. Lots of uncertainties, without even mentioning the political stuff. But I have a sneaking suspicion, at least in the US, that a lot of this magically goes away after the November Election.
 
airboss787
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Re: Relatively few bankruptcies so far

Tue Jul 14, 2020 7:01 pm

I think once travel resumes a bit and the larger, stronger airlines atleast start to just about break even, that is when we will see all the smaller or weaker airlines shut down. Right now, "everyone is in it together", but once things stabilise a bit, the everyone will be more like the stronger airlines will be in it together because they will stimulate and kill the weaker ones.
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eugdjinn
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Re: Relatively few bankruptcies so far

Tue Jul 14, 2020 7:29 pm

Quite possibly the next to die is ExpressJet - everyone in the company apparently received WARN act notices today and rumor says they may be looking at operating only 10 aircraft in October phasing out to 0 at the turn of the year. ExpressJet has no assets to speak of, all of their aircraft are United owned, so they are like Compass in being a workforce in search of an employer, but with United's 49(?)% purchase thought they were set for years to come. United proves again to be fickle, though, in truth, ExJet is another airline competing the in CPA world with extremely senior flight crews who are sure their pay has no affect on the bottom line. To that, ExJet management has run an airline with 25-80 planes with a massively bloated headquarters staff, also with many, many years in, and what is likely to be way too high a payroll for the size of the fleet. Did United realize that they could take the Trans States Airlines certificate and build a brand new regional carrier to fly those E145s with a lean and efficient HQ, rightsized to the airline, and 0year seniority crew???
 
Miamiairport
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Re: Relatively few bankruptcies so far

Wed Jul 15, 2020 12:19 pm

nighthawk wrote:
Wait until next year. Governments will be ending their furlough schemes by the end of this year, at which point labour costs will go through the roof. Coupled with lower than normal demand over the winter, and you'll find a lot of airlines very quickly burning through their government backed loans and declaring bankruptcy. Early next year is going to be a bloodbath.


Here in the US those schemes are set to expire at the end of this month. So far both political parties haven't shown much will to continue all the free money from the Fed. Moreover, all of the skipping of payment programs either ended at the end of June or will end July 31. As people are beginning to realize those came with a really heavy cost, the obligations did not simply disappear in the middle of the night.

Assuming the US schemes do not get extended, the real economic "depression" is coming. I remember in 2001-2002 and 2008-2009 air travel taking a huge hit. I have no idea why certain individuals would think hopelessly unemployed people unable to meet life needs would be buying an airplane ticket, even if it's $49 one way. We will eventually move away from COVID (and I'm in agreement it won't happen until after November) but the impact from tens of millions being thrown out of work could impact air travel for years to come. Add in business seeing the cost advantage of video systems over travel and I wouldn't want to be an airline CEO, particularly of one of the US legacies. (Well I guess for the right price I would).
 
rouelan
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Re: Relatively few bankruptcies so far

Wed Jul 15, 2020 12:24 pm

nighthawk wrote:
Wait until next year. Governments will be ending their furlough schemes by the end of this year, at which point labour costs will go through the roof. Coupled with lower than normal demand over the winter, and you'll find a lot of airlines very quickly burning through their government backed loans and declaring bankruptcy. Early next year is going to be a bloodbath.


Even before next year, end of year is usually a terrible time for cash with few advance bookings.
 
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Boeing757100
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Re: Relatively few bankruptcies so far

Wed Jul 15, 2020 1:15 pm

Please don't jinx us. Boeing CEO Mr. David Calhoun already predicts AA, UA, or DL will go, and then, we don't need others. Virgin Atlantic/Australia is in administration, all major Latin American airlines are in chapter 11, and most predict that Air India, Thai, and even as wild theories as PIA will soon follow.
 
hohd
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Re: Relatively few bankruptcies so far

Wed Jul 15, 2020 2:02 pm

US style bankruptcy generally favors the airlines, however in other countries, it is a very difficult and laborious process and more often the airline liquidates or ends up giving substantial control to other parties. So most airlines outside US do not even want to look at bankruptcy or administration.
 
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Revelation
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Re: Relatively few bankruptcies so far

Wed Jul 15, 2020 2:06 pm

nighthawk wrote:
Wait until next year. Governments will be ending their furlough schemes by the end of this year, at which point labour costs will go through the roof. Coupled with lower than normal demand over the winter, and you'll find a lot of airlines very quickly burning through their government backed loans and declaring bankruptcy. Early next year is going to be a bloodbath.

I agree. I think people looked at China's quick recovery and thought all we had to do was wait it out for a month or two and it'd all be fine. Meanwhile in China they had roadblocks with temperatures being taken and any reading over the line resulting in quarantine at a government hospital. I've been very sad to see some people on FB showing up at distant destinations. Seems we in the US decided a few weeks ago we couldn't even deal with waiting it out. The cost for this will be a very slow recovery. Turns out a virus doesn't care about your rights or your freedom or even your boredom.
Wake up to find out that you are the eyes of the world
The heart has its beaches, its homeland and thoughts of its own
Wake now, discover that you are the song that the morning brings
The heart has its seasons, its evenings and songs of its own
 
Exeiowa
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Re: Relatively few bankruptcies so far

Wed Jul 15, 2020 2:29 pm

A totalitarian government like China will do thing a democracy cannot to control a pandemic and Europe had much stricter lock down than the US. The stricter countries are getting over it quicker, and are ready to pounce to get it back under control at the hint of flair ups. In the US you can pretty much go anywhere you want. I saw a study that suggests the current problems in Texas and Florida were caused by people in the north east relocating to avoid the effects of shutdown and unwittingly spreading it around these other states. Without restrictions on movement its unlikely to end soon. Continued air travel is part of the problem, not so much for infections on board but for distributing people. A prolonged outbreak has got to have some effect. A government cannot indefinitely subsidize an industry because it does not have enough customers.
 
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Revelation
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Re: Relatively few bankruptcies so far

Wed Jul 15, 2020 2:44 pm

Exeiowa wrote:
A totalitarian government like China will do thing a democracy cannot to control a pandemic and Europe had much stricter lock down than the US. The stricter countries are getting over it quicker, and are ready to pounce to get it back under control at the hint of flair ups.

Correct. The point I was making was that people looked at China's recovery curve and did not take in the sacrifices that were needed to get such a recovery. Regardless of whether or not restrictions were being forced on them or not, the Chinese population accepted roadblocks and mandatory quarantines without rebellion. In an ideal world we'd see people here realize we should do the same kinds of things on a voluntary basis because society as a whole will recover fastest this way, but nope, people couldn't cope with sacrificing their wants and desires for the common good and now we have the long slow recovery.
Wake up to find out that you are the eyes of the world
The heart has its beaches, its homeland and thoughts of its own
Wake now, discover that you are the song that the morning brings
The heart has its seasons, its evenings and songs of its own
 
AA747123
Posts: 287
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Re: Relatively few bankruptcies so far

Wed Jul 15, 2020 2:50 pm

IMHO I think 2021 will be a very busy year in airline bankruptcy court with several CH11 and at least 1 or 2 CH7

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