ON TOUR: Chapter 11
One of the benefits of ABTN's ON TOUR section is that it allows The Editor to use the space, not only as a means of highlighting specific destinations and events, but items that he believes are of real interest to readers.
Since de-regulation by President Carter the airline industry in the US (and the rest of the world has followed) has had a real metamorphous with airlines of grand stature disappearing (as well as those noted above Eastern has gone, Braniff, National and many others), whilst South West, Jet Blue and Ted have appeared most successfully on the scene. Air Tran is a flourishing anomaly, a clever piece of marketing following a name change from the accident prone Valuejet. Chapter 11 has been the saviour of some of the great and the good (Continental saved twice by this legal function), but it is different from its nearest British equivalent. Creditors can actually get all their money back. It happened with Hawaii Airlines. US Airways is expected to emerge from Chapter 11 on 27 September and at the same time merge with America West on 27 September.
Here goes with some kind of definition.
The voluntary filing of a ”petition” for Chapter 11 (C11) reorganisation in accordance with US law, is an action that can be taken by a company to resolve financial problems such as high costs, excessive debt, a lack of liquidity, and/or unsustainable contractual obligations. During a C11 proceeding, the company restructures many of its debts and other contractual obligations, so that it can emerge as a strengthened, viable operating entity. Most pre-petition creditors will receive only partial compensation on their claims but that is not always the case (see above Delta & Northwest). A C11 filing immediately stops most lawsuits against a company and, through a legal mechanism known as the ”automatic stay”, prevents creditors from taking action against the company to collect any monies or property they are owed.
After the company files for C11, an official committee that represents the interests of general unsecured creditors is appointed. A USA C11 proceeding is different from bankruptcy in most other countries. Under a C11 filing - unlike ”Chapter 7” or ”liquidation” proceedings - a company largely maintains business-as-usual. There is no receiver or trustee appointed to sell assets to pay creditors, nor is there a cessation or dismantling of operations as would happen under Chapter 7, or ”receivership”, in other countries. Under a C11 proceeding, a company typically continues to pay employees their salaries and benefits, and maintains policies such as vacation, sick leave and travel benefits. As to goods and services provided during the C11 process, a company is also able to do business with suppliers and customers in a routine manner. Under Federal law, the company cannot pay most suppliers for goods or services provided before the C11 filing.
The C11 process ends after the court has approved a Plan of Reorganisation, which provides for a distribution of the company's economic value. This Plan is usually developed by the company in conjunction with its creditors.