Bankruptcy Reorg Last Chance

[schro]

I am a proprietor of a massively failing airline over in JA8 right now and doing a few experiments with the death spiral to see how possible it is to right the ship once the toilet starts swirling, and what I've come up with has been the obvious - it is near impossible to shrink an airline to profitability for a chance at recovery even if there's a distinct chance that one can recover, thus, I propose the following ONE TIME option for reorganization (akin to Chapter 13 bankruptcy). This would be available to airlines who no longer have the cash available to pay for heavy checks (negative cash), CI is declining and are otherwise identified as being doomed by the system.

Upon selecting the reorganization option, it would make it possible for the airline to shrink to profitability (if in fact, it is possible). It would require/allow the following things to happen -
1. All bases other than HQ will be closed.
2. All leased planes that are not currently scheduled on routes will be returned to the lessor with no penalty (player would need to unscheduled HQ planes that are no longer wanted prior to pressing the button)
3. Staff will be sacked to the 100% level
4. CI will get dropped to -100
5. (maybe) A provisional allowance to operate in the red and have maintenance performed and all recurring bills paid (maint/marketing) for 3-6 game months  to allow the airline to see if operations are possible at the shrunken size.

If a program like this was available, my JA8 airline could have been saved - I did everything on the list above except plane returns but now my revenue is lower than my lease bill, so there's no hope at this point. If I could have done a controlled shrink, then I would have positive cash today.

[Curse]

I like this idea. A CI drop to -100 seems a bit drastic and is, honestly, not what my feeling was and is when real Chapter 13 BKs occured. A CI reset to 0 should give the competitors enough space and earning for their work and also allow the airline to recover somehow.

An alternative to this is keep CI-100 but allow for a quick recover.

[LemonButt]

Or we could just have a leaseback program which I believe sami said was in the works.  If you have assets, you can sell them to the leasing company and lease them back.  This would provide significant lump sums to right the ship and pay to cancel leases, etc.  IRL I don't think any airline would flat out liquidate when they have assets they can use to free up capital via a leaseback.

[JJP]

Very nice suggestion, Schro.  I like Curse's idea of reset CI to 0 as providing enough space to competitors.  Interesting!

[LotusAirways]

Lease back option. Schro's airline was asset rich but cash poor. Problem would have been solved with lease back.

LA

[schro]

Lease back option. Schro's airline was asset rich but cash poor. Problem would have been solved with lease back.

LA

No, it wasn't. I had no assets that I could do anything with. Keep in mind that this airline was bankrupt before your registration date ;-).

Interesting how this ages old request for necro'ed.

[LotusAirways]

Yep, I am confusing Elite members and games.

Was actually thinking about Pan American Luxury Transport from esquireflyer on the current WG2, assuming it was over. But seems esquire was able to turn it around (net profits in the last 3 quarters), despite having the oldest fleet in the game up until very recently.

LA

[Sami]

Bump for comments on this matter, ie. 'chapter 11' equivalent set of rules.

[LemonButt]

Bump for comments on this matter, ie. 'chapter 11' equivalent set of rules.

Leaseback option.  Sell all your assets to a broker and leaseback for monthly lease rate.  This will give the airline a big cash influx while maintaining operations.  If they can't right the ship with the extra cash they received, then they go to liquidation.  Since the banking system won't let you take out loans against 100% of your assets, this makes sense.

For those who don't know, Chapter 11 is the US Bankruptcy code and calls for reorganization of debt versus liquidation of the company's assets.  This means if your expenses are $1000 and your income is only $900, you can file for Chapter 11 and the judge will force creditors to restructure debt to get you back under $900 in expenses.

[JumboShrimp]

Leaseback option.  Sell all your assets to a broker and leaseback for monthly lease rate.

As a one time, last reorg, would be fine, but I don't think this should be a routine thing.  I think players, as part of normal play, should depend on the UM pricing / timing to sell / acquire aircraft.  Either AI brokers of other players....

[Sami]

Planning features related to this thread so now it's a good chance to comment.

[schro]

I totally forgot I made this thread. Pardon me while I get my DeLorean up to 88mph.

[schro]

So, looking at the Preview over in the preview thread, I have the following thoughts - also keep in mind that long game worlds did not exist at the time this request was authored.

I think the quick sale of owned aircraft to brokers at 70% of market value is a pretty good target for abuse by a clever player, say, transitioning out of the prop age into the jet age and has a bunch of Connies purchased at half the current value. How can someone gaming the system to dump an undesirable fleet type or three for a one time windfall be stopped?

The purchase percentage should be lower and by adding the lesser of market or book it will prevent the restructuring airline from picking up a windfall profit for restructuring (as that's not how restructurings work) (e.g. the lesser of 50% of market or 50% of book value.). The amount of cash generated here should also be limited - airlines I see in this situation could generate billions of dollars of cash with this move, so I'd suggest limiting it to the amount needed to get them out of negative cash territory + a small cushion. If the airline is really able to rehabilitate, they should be profitable within days of pressing the button.

I think I saw this in discord as well - one driver of bankruptcies is ordering too many new planes for purchase without sufficient cashflow to buy them. Here, orders should be able to be cancelled, but no refund received as the benefit to the sinking airline is the release of them from future cash expenses they can't afford.

Loan term shifting isn't really material, but I suppose that's fine.

CEO should forfeit bonus and/or pay and/or accumulated earnings for this.

The other challenge here is how to handle airlines with only leased planes/none that can be sold. How does their cash balance get back into the black without getting closed? Do they get more time and the heavy maintenance able to be paid into the negatives for a bit?

What if they wait until 10 minutes before they're closed by the bank to restructure? In most cases, the death spiral of doom that becomes unrecoverable starts within 3 months of going cash negative - perhaps one can only restructure within 3 months of receiving that particular bankruptcy warning?



 

[groundbum2]

I'd suggest if any airline sells planes back to brokers they be banned from the new market for say 5 years, ie no new orders able to be placed. Yes they could use alliances or mates to get around this, but that would take person to person trust. I still wonder if I could buy old 747s cheap and sell them for twice the price using this suggested mechanism? That was a sound strategy until the AI broker got nerfed   

[Sami]

So, looking at the Preview over in the preview thread, I have the following thoughts - also keep in mind that long game worlds did not exist at the time this request was authored.

Yep. noted.

Do remember that this restructuring is only possible when bankruptcy warning is active, and can be done once in 50 game years. But I've added a few extra safeguards and features there, for example the maximum cash the airline can raise from these actions will be capped (the whole idea is just to get the airline back to positive).