Air carrier bankruptcy is a common occurrence in the aviation industry. However, there is a paucity of research on the topic of air carrier restructuring during the post-bankruptcy period. General restructuring literature has identified four types of actions: operational, financial, managerial, and portfolio. The purpose of this study was to partially fill the large literature gap in the area of air carrier post-bankruptcy performance through theoretical and practical contributions.
A multilevel exploratory factor analysis was conducted to explore whether the same restructuring areas were found in air carrier specific metrics. All four restructuring areas were found in the factor analysis. Next, multilevel modeling was conducted to determine whether each restructuring action had a significant impact on post-bankruptcy performance. The dependent variable used for analysis was the P-Score, an air carrier distress measure. Independent variables were air carrier specific, derived from literature to measure restructuring strategies. The restructuring period was defined as the quarter of bankruptcy filing until three years after emerging from bankruptcy protection. U.S. Department of Transportation financial and operational data from the total population of 25 large air carriers that have emerged from bankruptcy protection was used for analysis.
Operational, financial, and portfolio restructuring were found to have a significant impact on post-bankruptcy performance during the post-bankruptcy period. Managerial restructuring was not found to be significant during the post-bankruptcy period. Additional research of managerial restructuring is needed to better understand this strategy among distressed air carriers. To improve air carrier performance during bankruptcy and restructuring, management should attempt to reduce the cost of transport, consider deleveraging, and acquire debtor-in-possession financing.
This study has contributed theoretically and practically to air carrier restructuring theory. This is the first study to explore air carrier specific restructuring metrics for underlying factors and the first to measure restructuring strategies in all large air carriers that have emerged from Chapter 11 bankruptcy. Additionally, this study is the first to apply multilevel modeling to bankruptcy restructuring research
