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Airlines And Bankruptcy: Words You Often See Together

Warren Buffett, the famous American investor, once wrote in a chairman's letter: "The worst sort of business is one that grows rapidly, requires significant capital to engender the growth, and then earns little or no money. Think airlines."

To be sure, there are those who have made significant business success out of airlines. Think Virgin Airlines owner Richard Branson, who in his autobiography wrote that he sets himself "unachievable challenges" and attempts to meet them, referring in that case to his starting an airline.

But, despite his success, Branson hasn't been immune to Buffett's cautionary tale about airlines. According to Wikipedia, Branson sold his original company (Virgin Records) to keep Virgin Airlines going, probably to stave off bankruptcy.

Now we have, looking at Nick Brown's report with Reuters, more airline trouble in American Airlines, which has been in bankruptcy for two years now. The bankruptcy itself isn't news; it's the antitrust lawsuit filed by the Justice Department just days before the airline seemed scheduled to exit bankruptcy, which has the judge "expressing doubts" about allowing the airline to exit bankruptcy.

Brown quotes one of the bankruptcy lawyers involved in the case: "Don't allow the bankruptcy issues, which are complicated enough of their own, to be held hostage to very late-filed antitrust issues."

You might not own an airline, but your business may still run into financial trouble in the course of its existence. Financial trouble doesn't mean you shut down. Under Chapter 11, you can reorganize your debts and carry on.

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