Chapter 24: Special Issues in Airline Industry Reorganizations

Chapter 24: Special Issues in Airline Industry Reorganizations

Michael J. Edelman & Douglas J. Lipke

Vedder Price P.C., Chicago and New York

Traditionally, airlines in the United States utilize the bankruptcy laws to address numerous economic issues affecting their businesses, including the following:

  1. restructuring aircraft leases and secured financings;
  2. restructuring labor costs or retiree health benefits;
  3. restructuring other legacy costs (such as pension obligations and their postemployment benefits);
  4. eliminating unprofitable routes and route infrastructures;
  5. challenging the characterization of financings as true leases or secured financings (such as gate leases);
  6. obtaining a breathing spell from adverse market conditions (i.e., market conditions affecting market demand, 9/11, SARS (severe acute respiratory syndrome) or fuel costs);
  7. obtaining a stay from adverse creditor actions;
  8. negotiating and restructuring union contracts.

Although much can be written regarding each of these precipitating factors, Chapter 24 focuses upon only those factors for which airline restructuring possesses idiosyncratic rights, protections and practices. Accordingly, the chapter concentrates primarily upon the rights and protections afforded to aircraft lessors and creditors secured by aircraft collateral under the Bankruptcy Code and other applicable laws.

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