It is an observation that a number of business plans, as well as, opportunities related to sufficient capitalization were lacked in the early years of deregulation in the airline industry, as a few new airlines filed bankruptcy.However, this trend was joined by the large airlines due to the devastating effects of September 11, as well as, the rising costs due to the Gulf War and the violent competition in the country. In broad terms, ending of business is commonly taken as bankruptcy by nonprofessionals around the world.However, complexity has been observed in the regulations related to the bankruptcy code in the United States, as well as, the Federal Rules related to the subject. In common terms, when a company files for bankruptcy, it is taken as its point of termination.
However, creditors are being entertained by the common path of Chapter 11, which has been referred as an alternative to remain in the business and reorganize the earnings, in order to address the respective financial requirements of the company. In this case, a reorganization plan is approved by the court that allows the airline companies to run their business, even after the filing of bankruptcy. Under extreme conditions, liquidation proceedings are sought by these commercial companies under Chapter 7.In this case, the assets of the debtor are collected by an appointed trustee by the court that redeems them in the cash, in order to pay the creditors.
Thus, every airline company that has filed bankruptcy has gone through the process of reorganization in the case of Chapter 7, and in extreme cases, has filed for Chapter 7, that is, the liquidation. (Hecker, 2006)Over the last two years, significant deterioration has been observed in the financial conditions of the airline industry. A number of airline companies have filed bankruptcy, which has resulted in the ripple impact on the employees, customers, as well as, the industry itself.During the last decade, the large network airlines have been forced to file bankruptcy due to a number of factors.
For instance, the incident of September 11, 2001 is the most crucial factor that is responsible for the bankruptcies that have been filed by a few airlines in the United States. Similar incidents have resulted in the decline of business in the industry. (Littlejohns, 1997)In response, operating costs have been reduced, operations have been restructured, and new business strategies are in line to be adopted by the major airlines in the country. All these steps are being taken to counter financial losses that are now a usual thing in the airline industry.
A core part of revival strategy of each network carrier has been to cut back on seat capacity, in some cases by reducing or withdrawing service from a market altogether, in others by reducing frequency of service, and in some markets by the replacement of large airplane with smaller aircraft. In contrast, quite a few low-fare carriers have continued to increase service after only a concise decline in capability immediately following the radical attacks.Airline bankruptcy has affected a number of subjects. For instance, decline in the financial health of many airports is one of the implications that have been observed due to a number of bankruptcies of airlines. After the attacks of September 11, safety and security costs were increased by a number of airports, while air travel was declined that resulted in the reduction of revenues from airlines.Moreover, financial stress at a greater extent has been observed in the airports due to their substantial fixed costs and limited flexibility in terms of operating costs.
Furthermore, it is known that airline operations and charged concessionaries are one of the main sources of revenue generation by the airports, which has affected adversely due to a number of airline bankruptcies in the last decade. The impact of airline bankruptcies on the airports, employees, customers, as well as, the industry itself is one of the main objectives of this study.Undergoing bankruptcy proceedings will be studied in this paper, which will support the primary objective of this paper. Moreover, certain airlines will be taken as case studies, which will help in the better understanding of the subject. (Hecker, 2006)
