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I was hoping this article would explain why they suddenly left 600k people stranded instead of winding-down the business, but no such luck!
by maxk42 7y ago
I was hoping this article would explain why they suddenly left 600k people stranded instead of winding-down the business, but no such luck!
- NeedMoreTea 7y agoThey were insolvent, at which point they are not allowed to trade. There's a specific offence of trading whilst insolvent. The CAA brings all the UK customers home as near to on schedule as possible under ATOL rules. Not sure how other nations play it out. There was talk after Monarch's collapse a couple of years ago of permitting an exception in the insolvency rules. Specifically to allow the use of the collapsed group's aircraft and pilots. No more was every heard of it. But it was Chris "failing" Grayling as Transport Secretary, so hardly surprising the initiative failed.
- EpicEng 7y agoHow do you continue to fly airplanes around when you're bankrupt? I don't think "winding down" is much of an option for an operation like this.
- joncrane 7y agoSurely even the below average business owners will know at least a week in advance that they're going bankrupt?
- jdsully 7y agoOnce bankruptcy is inevitable it's a mad rush from creditors to secure assets. The net effect is your "bankrupt" as soon as it appears inevitable regardless of whatever timeline you would have planned. Further continuing to trade after your insolvent is a form of creditor preference. In most cases your customers become just another creditor upon bankruptcy. This is of course illegal.
- michaelt 7y agoInsolvency law already allows for some creditors to be higher priority than others. Some would say the people who are in a foreign country and owed a flight home should be the highest priority creditors. And if operating a flight is the most efficient way to pay that debt....
- jdsully 7y agoGiving customers higher preference would indeed be possible if agreed ahead of time. But it would increase borrowing costs as bond holders would now be subordinate. Don’t expect it to happen unless a law mandates it - consumers don’t have enough bargaining power. In the case of this bankruptcy preferring customers would be changing the rules after the game had started. Even if you did it a bankruptcy judge would be in his rights to claw back the cost from the consumer.
- shkkmo 7y agoIt makes zero sense that lenders, who agreed to take on some risk, are allowed to steal money from customers who paid a product they never received and never decided to take on risk.
- jdsully 7y agoYou take on the risk when you pre-pay for services you haven't yet recieved. By law you are also a creditor just like a bond holder. Similarly when you eat at a restaurant and pay at the end the restaurant is providing you credit. Most people don't think of it this way because the transactions go smoothly and the distinction is irrelevant. But it does affect what rights you have if something were to go wrong.
- deleted 7y ago[deleted]
- markdown 7y ago
- chrisseaton 7y agoIf you announced that you were going to go bankrupt in the future, your creditors and investors would bail, making you immediately bankrupt. There’s no way to ‘wind down’.
- perl4ever 7y agoWhat do you think happens in the US? It sounds like you're saying that Chapter 11 is not a conceivable way to do bankruptcy.
- chrisseaton 7y agoBut we don't have Chapter-11-style provisions in the UK. If we did, you could effectively wind down or restructure a company. But we don't. So you can't. In the UK if you know that are you insolvent (and knowing that you are about to be insolvent is effectively the same thing as knowing that you are insolvent) then it's illegal to trade. Using your last bit of money to do something like fly people home is illegal - it would be defrauding other creditors who have higher priority to be paid off.
- perl4ever 7y agoSure, the tone of what I was responding to was that it was impossible to do things differently. Kind of like an American explaining why universal healthcare is impossible. Having bankruptcy at all is an attempt at making a situation full of inherent conflict more orderly and less disruptive, so it isn't obvious why one must execute its provisions in a disruptive manner.
- perl4ever 7y agoWell, if you stop doing business suddenly, it seems very plausible that will negatively impact the value recoverable by the creditors, so why should everything stop immediately?
- alexhutcheson 7y agoIn the US they would have filed for bankruptcy under Chapter 11[1] and continued to fly while they worked out a restructuring. Most of the major airlines in the US have done this in the recent past: United in 2002, Delta in 2005, and American in 2011. UK bankruptcy law is different and doesn’t give companies this option. [1] https://en.wikipedia.org/wiki/Chapter_11,_Title_11,_United_States_Code https://en.wikipedia.org/wiki/Chapter_11,_Title_11,_United_S...
- EpicEng 7y agoYep, mentioned that somewhere down below.
- xioxox 7y agoYes - the article didn't mention the massive debt they couldn't pay off and wasn't being extended.
- mcarmichael 7y agoOn the question of the decision-making process of the corporate officers, hope was springing until the end: https://en.wikipedia.org/wiki/Thomas_Cook_Group#Collapse https://en.wikipedia.org/wiki/Thomas_Cook_Group#Collapse As uncertain as UK governance and Chinese international trade relations have been recently, they might be excused for thinking anything could happen in the space of a month.
- youngtaff 7y agoIn the UK when an airline goes bankrupt they lose their AOC (Air Operators Certificate) and at that point they can no longer fly Many of those people aren't really stranded, they'll have their holiday as planned and the CAA will fly them home at the end of it As new passengers aren't starting their holidays there's a rapidly decreasing number of people to fly back