Airline Bankruptcy

When an airline goes bankrupt there are two options.
1) Either the plane continues on its route, and ends at the final destination. Sometimes going back to base afterwards with the passengers booked for the home leg. But often the homeleg can not be done because local creditors seize the plane.
2) The plane goes back to the home base mid-flight.

Which of the two happens depends on a multitude of factors. First and foremost obiously the ability to do so. When a plane does not have sufficient fuel to go back to base, then obviously the flight will continue.

Typically an airline would want to keep its assets on its home base. A plane makes a nice object for creditors to make a claim on. So a plane that gets stuck at a remote airport stands a good risk of local contractors (maintenance, fuelers, ATC, ground handling etc) putting a claim on the plane to force the swift payment of their services rendered.

Indeed… I have heard that the crew of one Braniff plane mutinied when the airline went bankrupt and diverted the plane to San Francisco… they continued to Honolulu as scheduled…

This is not how bankruptcy works in the US

If a company declares bankruptcy under chapter 11, the property of the company can not be seized by the creditors. Normally a company arranges bank financing just prior to declaring Chapter 11. Initially passengers see no difference. Any financial changes to the company must be approved by the courts. In the United States where you see problems is just prior to a bankruptcy declaration. Companies stop making deliveries or require cash (not check) payments because they know they may not get paid or get paid pennies on the dollar.

Other forms of bankruptcy include liquidation (which is what happened to Sabena and Swissair).

I am not sure about the EU, but in the US if you buy a plane ticket with a credit card, you do not have to worry about losing your money if an airline goes belly-up and liquidates. If you pay cash you become a creditor and get paid back, if you get paid back, pennies to the dollar way down the road.

Right now I would not buy a ticket on Varig except with a credit card and with the understanding that even with a credit card you will get your money back but may not travel.

Bkonner

The planes are sold legitimately to leasing companies and usually well in advance of a bankruptcy. Sell-leaseback constructions are one of the fastest ways for airlines to gain a quick input of cash. That is usually why it is one of the first steps taken when an airline gets into dificulties. So the buyers do get to keep the planes.

When an airline goes bankrupt there are two options.
1) Either the plane continues on its route, and ends at the final destination. Sometimes going back to base afterwards with the passengers booked for the home leg. But often the homeleg can not be done because local creditors seize the plane.
2) The plane goes back to the home base mid-flight.

Which of the two happens depends on a multitude of factors. First and foremost obiously the ability to do so. When a plane does not have sufficient fuel to go back to base, then obviously the flight will continue.

Typically an airline would want to keep its assets on its home base. A plane makes a nice object for creditors to make a claim on. So a plane that gets stuck at a remote airport stands a good risk of local contractors (maintenance, fuelers, ATC, ground handling etc) putting a claim on the plane to force the swift payment of their services rendered.

The luggage will be in the same plane as the passenger. So the passengers will get it back. It may take a bit longer though as bankruptcies tend to disrupt the work for obvious reasons!

Unacompanied minors I would assume would still be taken care of. It might not be with the smile and patience you’d normally expect, but considering the situation staff is in that would be understandable. But the kids won’t be left alone to roam the airport.

Yes that would be the case, but……

…… in most cases when an airline files for bankruptcy everything will have been mortgaged already. I can not recall the last time an airline that owned planes went bankrupt. It is highly common for struggling carriers to sell their planes, and lease them back. Same goes for real estate (tripple mortgages), cars (rental/lease) and most other assets that would be worth something.

Do the buyers get to keep the planes?

Or are the recently sold-off assets regarded as fraud on creditors and seized to be sold again?

Also, when an airline goes bankrupt, what happens to planes in flight? And what becomes of luggage transported by the airline at time of bankruptcy, or unaccompanied minors in transit?

Yes it is highly unlikely.

Take for example the bankruptcy of Swissair or SABENA or Dornier. Their assets where sold of not too long ago, since bankruptcy procedures take time.

There where catalogies available with stuff on offer. A large majority was filled with office equipment ranging from pens to computer to desktop models of planes (complete with desks ;)). The rest was filled with tools, older cars, tugs, cutlery, safety cards etc. Small(ish) stuff.

Thanks for that – do you recall how much the tug went for – would make a good collectors item!

Tenthije are we therefore concluding that it is unlikely if not impossible that aircraft could be acquired on the cheap from an airline going bankrupt?

Yes it is highly unlikely.

Take for example the bankruptcy of Swissair or SABENA or Dornier. Their assets where sold of not too long ago, since bankruptcy procedures take time.

There where catalogies available with stuff on offer. A large majority was filled with office equipment ranging from pens to computer to desktop models of planes (complete with desks ;)). The rest was filled with tools, older cars, tugs, cutlery, safety cards etc. Small(ish) stuff.

a few years ago, i was talking to somebody that owned a haulage company…due to various circumstances (the company he did 90% of his business with went bankrupt) his business went bankrupt….The administraitors called in sold his fleet of lorrys and he said the prices were stupid, for the price of a new lorry and trailor, you could of bought 3 of his trucks that the administraitors sold…

My friend’s uncle owns a plastic injection moulding company and in the companies early days managed to acquire £16,000 worth of equipment for £1250,

Tenthije are we therefore concluding that it is unlikely if not impossible that aircraft could be acquired on the cheap from an airline going bankrupt?

a few years ago, i was talking to somebody that owned a haulage company…due to various circumstances (the company he did 90% of his business with went bankrupt) his business went bankrupt….The administraitors called in sold his fleet of lorrys and he said the prices were stupid, for the price of a new lorry and trailor, you could of bought 3 of his trucks that the administraitors sold…

Yes that would be the case, but……

…… in most cases when an airline files for bankruptcy everything will have been mortgaged already. I can not recall the last time an airline that owned planes went bankrupt. It is highly common for struggling carriers to sell their planes, and lease them back. Same goes for real estate (tripple mortgages), cars (rental/lease) and most other assets that would be worth something.