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Are the bankrupt skies the friendliest?

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  • Ciliberto, Federico
  • Schenone, Carola

Abstract

We use data from the US airline industry to investigate whether firms that are under bankruptcy protection, as well as these firm's product market rivals, change the quality of the products they offer. We measure the quality of the services offered by a carrier using flight cancelations and delays, and the age of the aircraft used by the carrier. We find that delays and cancelations are less frequent during bankruptcy filings but return to their pre-bankruptcy levels once the bankrupt firm emerges from bankruptcy. We also find that firms use Chapter 11 filings to permanently reduce the age of their fleet. We do not find evidence of statistically and economically significant changes by the airline's competitors along any of the dimensions above.

Suggested Citation

  • Ciliberto, Federico & Schenone, Carola, 2012. "Are the bankrupt skies the friendliest?," Journal of Corporate Finance, Elsevier, vol. 18(5), pages 1217-1231.
    • Handle: RePEc:eee:corfin:v:18:y:2012:i:5:p:1217-1231
    DOI: 10.1016/j.jcorpfin.2012.07.005
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    More about this item

    Keywords

    Bankruptcy; Chapter 11; Product market quality; Airline industry;
    All these keywords.

    JEL classification:

    • G33 - Financial Economics - - Corporate Finance and Governance - - - Bankruptcy; Liquidation
    • L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets
    • L93 - Industrial Organization - - Industry Studies: Transportation and Utilities - - - Air Transportation
    • K2 - Law and Economics - - Regulation and Business Law

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