Chapter 11: American form of bankruptcy to give recovery time

The United States has a form of bankruptcy which does not exist in other nations. This is Chapter 11. This has been declared by many other nations as well as the European Market as an unfair competition. A company declares Chapter 11 and it goes into a sort of financial limbo where it can operate, make money, sort out its problems and then come out of Chapter 11 into normal operation at a time that suits it. Some American airlines have been in Chapter 11 more than once.

Ed Bastian (seen here), president of the recently merged Northwest and Delta airlines, both of which emerged from Chapter 11 in 2007. said Detroit’s two quasi-nationalized automakers could come through bankruptcy as strong competitors if they use this process to improve the products they offer to customers.

He said, ‘Bankruptcy worked for our companies. … Now we stand as the strongest airline in the United States and the largest in the world.’

The airline has just launched a direct flight from Detroit to Shanghai.

Detroit Free Press reported not only did Delta and Northwest use bankruptcy to reduce costs to 15% below those of key competitors, but they also used debt reduction and cost savings to transform Delta from a national carrier into a major international airline.

Delta’s routes were only 20% international before bankruptcy. Now the company is 40% international, and the goal is to soon become 50% international.