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Comments (4)
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Save/ShareThat was the hot question at the recent U.S. Travel Association's TravelCom conference last week. Many travel companies have too much debt and will have to work hard to survive.
Reporter Dennis Schaal reported on the event for Travel Weekly. Some highlights:
American and United may have to enter Chapter 7 bankruptcy proceedings next year, unless things improve soon. Of all the airlines, they have the most debt and it has been costing them more to fly each seat one mile than passengers are willing to pay, says the Wall Street Journal.)
Orbitz and Travelocity have a lot of debt. Expedia might buy Orbitz, or Travelocity might merge with Orbitz. Schaal adds that Orbitz is particularly hard hit in this recession because it didn't diversify its business into hotels and vacation packages as much as the other online travel agencies did and that profits from selling airline tickets has been shrinking, especially now that everyone is waiving their booking fees.
Royal Caribbean International and Norwegian Cruise Line are also more heavily indebted than the industry average.
Here's hoping that every company finds a way to work smarter and survive. We're rooting for all of you!
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You are confusing Chapter 7 and Chapter 11. Neither airline is doing great, however United has already gone through Chapter 11 bankruptcy and got rid of most of it's previous debt. American on the other hand has not entered bankruptcy yet and still has a lot of debt on it's books. Neither airline is likely to enter bankruptcy with an improving economy. However if it were to happen it would be a Chapter 11 reorganization not Chapter 7.
Posted By MJ Bresnahan on April 12, 2009, 12:11 AM
You're right, of course. Broadly speaking, Chapter 7 is for liquidation and Chapter 11 is for reorganization and a rinsing off of debt. My bad.
Posted By Blog Editor on April 12, 2009, 11:05 AM
I'm sure you're worrying needlessly. After all, this is the "United" States and we're all "Americans". There's bound to be a bailout (oops, bad term for anyone flying) before either airline needs to think about filing for bankruptcy.
Posted By Gary on April 13, 2009, 5:12 PM
I hope there's no bailout...there's been way too much corporate welfare already. Let the free market decide. Maybe American & United should merge...or follow Jet Blue, and Southwest's business model. They seem to be doing well....
Posted By Mike on April 13, 2009, 9:05 PM