Tough economic times can impact any business and cause a once profitable company to become overwhelmed by debt. Business bankruptcy may be the best option to save a company on the brink of collapse. Also known as Chapter 11 or commercial bankruptcy, this option allows for reorganization of business debts and allows the company to keep its door open. One major airline is facing a potentially more profitable future after filing for Chapter 11 bankruptcy protection.
Once the world’s largest air carrier, American Airlines has experienced heavy financial losses in recent times. From 2001 to 2010, the company lost over $12 billion dollars. American’s parent company, AMR Corp., filed for bankruptcy in November 2011. The company has lost another $2.8 billion since filing for bankruptcy but did manage to make money for two quarters of 2012.
In addition to being able to reorganize its debts under Chapter 11, American Airlines could see steady profits return with its proposed merger with the more successful US Airways. A smaller airline, US Airways has been profitable in recent years and earned $637 million in 2012.
The merger, which has been pushed for by American’s creditors since August 2012, was announced Feb. 14. If the merger is approved by bankruptcy and antitrust officials, the newly merged company will maintain the American Airlines name but will have a US Airways CEO.
Working harder to improve sales and boost profits may not always lift a company out of dire circumstances. Profits may not rise enough to pay off mounting debts or stop threats from creditors seeking payments.
Commercial bankruptcy puts an immediate end to threats and collections and provides an opportunity for businesses to develop manageable plans to repay debts. Business owners facing overwhelming debt should find out if business bankruptcy is a worthwhile option. It may be the best legal solution to save a company.
Source: News Channel 9, “American Airlines, US Airways Merger Imminent,” Feb. 14, 2013