Filing for bankruptcy needs to come after much thought and consideration. A debtor needs to consider how it will affect their creditors, their own daily operations and their future. This should be the same for businesses, just on a much larger scale. Filing for bankruptcy should be what’s best for your company, not anyone else’s. Recently, however, we’re seeing a trend of businesses filing for bankruptcy to get an edge on their competition.
It’s almost like the idea of cheating on a test-why study to make a B when you can cheat and make an A? Doesn’t sound very honest does it? Now, let’s change the situation a tad bit. You study and make a B, when every other student in class has cheated to make an A? Does considering cheating seem a bit more justified now? Unfortunately this is what businesses are seeing; their competition is filing for bankruptcy, giving them a major leg up. They can now cut costs and lower their prices, leaving the financially burdened companies in the dust. Does that seem fair?
Unfortunately, for the airline industry, it’s becoming overly apparent that filing for bankruptcy is the only way to survive. Just recently, The AMR Corporation has decided to file for bankruptcy protection. Its airline company, American Airlines, will operate as usual, but will be able to shed its heavy debt burden. They expect no interruption in their flight schedule or frequent flier programs.
One of the goals in filing is for AMR to lower its labor costs. AMR’s American Airlines was once the nation’s biggest airline, but is competing with low-cost competitors like Southwest Airlines. AMR’s other competitors cut their fares to be able to compete. AMR was only able to compete by increasing their borrowing, which couldn’t have come at a worst time.
Now that both Delta Air Lines and United Airlines have filed for bankruptcy, AMR is out of options. They have both drastically cut labor costs as well as merged with other high-powered airlines to stay strong. If AMR doesn’t take a similar approach for American Airlines, they will easily be bumped out entirely by their leaner competition.
Unfortunately, when these series of bankruptcies start occurring within one industry, the creditors are the ones who suffer the most, especially the creditors of unsecured debt. Another concern whenever a company files for bankruptcy is whether or not retired employees’ pensions will still be honored. To learn more about the bankruptcy process and to read more about other companies who have filed check out our El Paso bankruptcy attorney blog.
About the Author: Jeff Davis is the Owner of the Davis law firm and a highly experienced El Paso bankruptcy attorney. To find out more information about a El Paso bankruptcy lawyer, please visit www.jeffdavislawfirm.com.