What is the process when an airline goes bankrupt?
In: Economics
1. Cry to government
2. Get giant bailout
3. ???
4? Profit, somehow
Ideally?
1. They go bankrupt
2. They’re nationalized
3. No more checked bag fees
There is a fairly standard process after a firm declares bankruptcy. There are several kinds of bankruptcy in the legal sense and they operate slightly differently. I guess you are not asking about the legal process.
A company declares bankruptcy generally when it doesn’t have enough cash to continue funding operations. The company might still own a lot of stuff but simply lacks the ability to pay to continue operations.
For airlines, typically:
1) All flights are cancelled.
2) Staff are laid off.
3) Courts get involved and appoint a receiver.
4) The receiver decides what to do with the assets of the company and who should get paid first (usually debt holders and employees). There are procedures here
5) At the same time, there are a lot of negotiations going on (under the Court’s supervision). Other companies or suppliers or banks might bid for the assets of the company and they can negotiate with the current debtholders and management on a recovery scheme.
6) Most of the time the existing shareholders are left with very little. Many existing suppliers might agree to forgive some debt in exchange for other things.
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