Originally Posted by
sailingfun
Chapter 11 in this environment is quite likely to lead to chapter 7. A reorganization under chapter 11 is only possible if a business has a viable revenue stream. Currently that is not the case. Keep in mind when you file chapter 11 you end up on a cash basis for day to day expenses and financial control is passed to the creditors committee. Delta airlines came within 1 vote of going away when the creditors voted on Parker’s offer. The first airline to file chapter 11 will have a strong possibility of liquidation. All the major airline management teams will fight tooth and nail to avoid filing.
Hard to believe that the creditors will think owning a pile of airplanes and routes will be worth anything in the short-term, or that the government is ready for only 2 major international airlines. UAL is in a bad place with heavy Asia exposure also. Sooo, Delta is going to absorb all of Europe, Africa, Asia, South America, and Middle East? Unless Southwest or Spirit suddenly start buying widebodies, chapter 7 for either UAL or AAL seems unlikely.
In the past when major airlines have gone belly-up, another airline inevitably buys up all the resources. No one can do that here, and even if they could the feds wouldn't allow it on anti-trust grounds. Creditors are going to be better off with newly issued stock to replace some of the debt, especially in an environment where demand is going to rapidly increase (once a vaccine is out, demand will return - not to late 2019 levels, but enough so that everyone can return to profitability).
Stay strong. The next few months are going to be bad...