Maybe...but, I think you are answering a different question...will the court allow them to reorganize or force them to liquidate.
Ok, I'm not a lawyer so I hope this is the right answer. Unfortunately, my company has had quite a number of our customers file chapter 11, so I have some experience here. We have a legal department in my company, so I can probably easily get answers to these questions, but not until monday. Here is what I do know...
It would not make sense to enter into a chapter 11 until a company really hits bankruptcy as the last resort. A company would generally only go into chapter 11 after it has lost all of its operating cash OR needs protection to prevent the loss of the remaining cash. This is basically when the company can no longer make payroll or there is some payment looming on the horizon. It basically renders all collections, leases, agreements, etc "on hold" until both the company and creditors can make proposals to the court.
So lets say US needs to reduce capacity immediately but is in contracts with regional carriers. It is the regionals that are causing the fast depletion of cash. Filing a chapter 11 will put these contracts up for review in the bankruptcy court, but in exchange... the entire company must be reorganized, not just these agreements.
Another case... US cant pay the leases on its planes and the creditor says they will take them back. chapter 11 would stop them from being able to do this until the court hearings.
US needs to reduce its fleet, and the union contracts say that they cant go below a certain number. Chapter 11 would allow these contracts to be reviewed in the courts.
A chapter 11 would also VOID ALL FUEL HEDGES... Another reason why it doesnt make a lot of sense.
So why isnt this the first choice? generally your CEO and executive team OWN a large portion of the company. Chapter 11 will basically render their ownership of shares valueless. A public company will immediately "delist" and move to the OTC. The stock is now valueless... basically. anyone who owned it will lose out. Institutions, banks, executives, pension plans, etc. The only way it would re-emerge with a value would be if at the end of the day, the assets greatly exceeded the actual debt, but if this were the case, you would never file in the first place...
When it goes to court, as part of the reorg, everyone that has obligations and everyone that has ownership goes into court review. The courts decide one of two things, if it makes more sense to reorganize and emerge under a new ticker symbol and retain the assets and emerge with new partnerships and agreements, or change to a chapter 7 and liquidate. the court decides based on what is "better" for everyone involved.
This is why airlines always seem to emerge in tact, with a new ticker symbol. the employees stay on, either on the same contract, or without a contract that needs to be renewed, or has been changed. the leased planes stay with the "new airline" and all new terms are negotiated. the employees lose their pensions, etc. airlines almost always would reemerge, but only because of their size. Say US has a fleet of 300, hypothetically... The bankruptcy court would need to determine, could they liquidate 300 planes? Bank of America, Wells Fargo, or the lessors wont have any use for that many of them. In this case, the airline probably reemerges. If the airline had a fleet of 10 planes... It would probably end up in chapter 7, and all the assets liquidated.
the short answer, no liquidation unless chapter 7 is filed. this is the complete liquidation of the company.
no chapter 11 unless there is some type of liability that MUST be changed in order for the company to stay in business.
otherwise, everyone loses.
