As a consequence of the Covid-19 commercial airlines have had to make a series of modifications and adjustments to how they operate, which can lead to large losses as mentioned in “Measures by the Covid-19” and may lead to the bankruptcy to several airlines. As a consequence, airlines have been evaluating how to stay afloat and be able to overcome this crisis.
Contents
US bankruptcy law
The bankruptcy law of the United States is a legal process established in that country. This law focuses on companies being able to reorganize and carry out a new financial structure after facing a crisis; All this is carried out under the magnifying glass of the judicial system of that country. That is to say, the airlines place their brand and their assets as a guarantee before the judiciary, in this way they have protection to lengthen the payment of pending debts and obligations, in addition, during this time they continue operating regularly to pick up those losses they have had.
Who can adhere to said law?
This law was created so that companies that are not in a position to assume their short-term debts and cannot make the payment of their creditors, have the option of sticking to it for a certain time. So, Chapter 11 of the US Bankruptcy Law will allow the company to restore and perfect its finances with the follow-up that the American judicial system will provide.
Avianca
As a consequence of the Covid-19, there has been a significant decrease in commercial flights, which has caused large losses to different airlines, which is why Avianca, in order to continue operating and reestablish its services, announced that they would voluntarily host the Chapter 11 of the United States Bankruptcy Law before the New York Bankruptcy Court.
Previously, the airline had also used this procedure, currently, the airline announced its bankruptcy before reaching the deadline that it had for the payment of US $ 65 million for some bonds, after which they stated that in order to settle this problem, they had requested help from the Colombian government because due to the closure of borders decreed by said government, they were forced to stop their operations.
Latam
Like Avianca, the Latam airline has been affected by the financial crisis. As a result of the pandemic, they have been restricted from being able to cancel the amount that corresponds to their creditors, in addition, they have not been able to keep operating regularly due to the restrictions that exist for free transit.
Based on the aforementioned, this airline has also declared that it will adhere to Chapter 11, this announcement includes its subsidiaries in Chile, Peru, Colombia, Ecuador and the United States. They detailed that this announcement does not imply the bankruptcy of the company, which is why it is a process in which they restructure their functions, where they can make the payment of their employees, pay their suppliers and execute another operation that they consider necessary to continue operating.
What do you think about this topic? Did you know the US bankruptcy law?
If you have any questions or queries you can contact us or write your query at the bottom (comments section).
Image by rauschenberger via pixabay.com under creative commons license.
