U.S. Airline Bankruptcies and Service Cessations

Many lay observers broadly equate bankruptcy with going out of business. However, the U.S. Bankruptcy Code and the Federal Rules of Bankruptcy Procedure are complex, affording companies different means of addressing their financial plights. The most common path, Chapter 11 (reorganization), "ordinarily is used by commercial enterprises that desire to continue operating...and repay creditors concurrently through a court-approved plan of reorganization." Under more extreme circumstances, companies engage in Chapter 7 (liquidation) proceedings, which entail "an orderly, court-supervised procedure by which a trustee collects the assets of the debtor’s estate, reduces them to cash, and makes distributions to creditors, subject to the debtor’s right to retain certain exempt property and the rights of secured creditors." For more information on federal bankruptcy law, proceedings and terminology, please consult Bankruptcy Basics, published by the Bankruptcy Judges Division of the Administrative Office of the United States Courts. Other sources of bankruptcy research include BankruptcyData.com, the American Bankruptcy Institute, and the Cornell University Legal Information Institute.

Pre-1978, bankruptcies were extremely rare in the unduly regulated environment. [Some exceptions existed for intra-state carriers, which were not regulated by the Civil Aeronautics Board.] The CAB typically arranged marriages between failing carriers (i.e., Northeast) and survivors (i.e., Delta), transferring routes and assets to the surviving carrier. Since 1978, there have been well over 100 bankruptcy filings, although not all of these have resulted in liquidation. The early years of deregulation saw numerous filings amongst startup carriers that lacked viable business plans or sufficient capitalization. However, recession, fierce competition, rising costs, the Gulf War, and the September 11, 2001 tragedy prompted bankruptcy filings amongst several larger carriers.

The table below is a loose, unofficial compilation of research conducted by various individuals. Neither DOT nor A4A maintains official records of airline bankruptcy filings and/or service cessations. As such, we cannot verify the accuracy of each individual entry. The table is provided as a service rather than an authoritative source. It is the only known source that is publicly available, free, and centralized.