Originally Posted by
Probe
No airline could shrink 90% and survive without Chapter 11. You can furlough 90%, which is nice, but you still have to pay all your creditors for the other 90%. No chance that can happen without court protection. Airport leases, aircraft leases/payments, debt payments, rent on property and equipment. Etc. Labor is only somewhere around 40% of an airlines cost at the moment with contract wages being high.
Honestly, I think the best option is Chapter 11, and the sooner the better. Borrowing 10's of billions to pay creditors while you bleed to death anyway is no future for any business. If you did survive you would be so saddled with debt, you are a zombie company anyway.
The Feds are paying the payroll through Sept 30. All bets are off after that.
This is all about cash preservation and time. The company will do everything in their power to drive the cash burn towards zero. Will they get to zero or do they need to get to zero? Probably not because they don't need to. The company needs to drive the cash burn to a level that allows them years, not months to operate. Company actions combined with increasing revenue will produce results. The million dollar question is when will revenue return? As with the stock market will it be V, U, or L shaped? Any amount of revenue return will reduce cash burn.
I'd imagine the goal is to position the airline to benefit from the recovery while allowing it enough time to wait for the recovery. At a current burn rate of $40M/day we have time when you consider cash on hand, assets, and other options. The actions taken by the company and incremental revenue increases will buy further time. Running to Bankruptcy court sooner, rather than later is not the best option at the moment.
Obtw, labor is 33% of the airline's operating expense with contract wages being past due at market rates set years ago. Don't mess with my contract folks.