When a large corporation struggles through bankruptcy, it can often affect many areas of the business, including customer service and productivity. A Chapter 11 bankruptcy filing is often one of the more complicated forms of bankruptcy, because it involves the reorganization of debts and assets and relies on working with existing creditors
American Airlines, which had filed for Chapter 11 bankruptcy protection in November 2011, saw its on-time performance hit a low of 59 percent in September of this year. As part of the business reorganization, a federal bankruptcy judge allowed American Airlines to impose new work rules and new pay on the airline’s pilots. After this ruling, it was reported that pilots began to file extra maintenance complaints at seemingly the last minute that led to an increase of delays and cancellations of American Airline flights.
The company’s CEO has noted that performance was improving and revenue was increasing, despite American’s recent troubles. Since entering bankruptcy protection, the airline has renewed or won more corporate travel agreements compared to the same time period a year before.
Business executives considering the option of filing for Chapter 11 need to be aware of the unique financial and tax implications of a business bankruptcy. A business that files for a Chapter 11 may be able to restructure its mortgages and debts as well as reduce any outstanding tax payments to a manageable level whether through a reduction or a payment scheme. This may also be done without having to layoff too many employees.
Source: Associated Press, “American Airlines CEO acknowledges rough few weeks,” Scott Mayerowitz, Oct. 8, 2012