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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 firms' product market rivals, change the quality of the products they offer. We measure the quality of the services offered by a carrier using flight cancellations 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, 2010. "Are the Bankrupt Skies the Friendliest?," MPRA Paper 24915, University Library of Munich, Germany.
    • Handle: RePEc:pra:mprapa:24915
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    3. Ng, Kam To & Fu, Xiaowen & Lee, Jaewoon & Yamaguchi, Katsuhiro & Zhu, Chuanyan, 2023. "The Effects of Bankruptcy on Airline Yield and Frequency: The case of the duopolistic domestic market in Japan," Transport Policy, Elsevier, vol. 142(C), pages 28-36.
    4. Ren, Junqiushi, 2023. "Financial conditions and incumbent quality responses to entry: Evidence from airlines' on-time performance," Journal of Air Transport Management, Elsevier, vol. 107(C).
    5. Kamalini Ramdas & Jonathan Williams & Marc Lipson, 2013. "Can Financial Markets Inform Operational Improvement Efforts? Evidence from the Airline Industry," Manufacturing & Service Operations Management, INFORMS, vol. 15(3), pages 405-422, July.
    6. Bock, Sebastian & Mantin, Benny & Niemeier, Hans-Martin & Forsyth, Peter John, 2020. "Bankruptcy in international vs domestic markets: Evidence from the airline industry," Transportation Research Part A: Policy and Practice, Elsevier, vol. 132(C), pages 728-743.
    7. Chao Ma, 2019. "Does capital structure differently affect incumbents' responses to entry threat and actual entry?," Journal of Economics & Management Strategy, Wiley Blackwell, vol. 28(4), pages 585-613, November.

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    More about this item

    Keywords

    Bankruptcy; Chapter 11; Product Market Quality; Airline Industry;
    All these keywords.

    JEL classification:

    • K2 - Law and Economics - - Regulation and Business Law
    • G3 - Financial Economics - - Corporate Finance and Governance
    • L1 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance

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