This is what bankruptcy is for. I strongly recommend you read a primer on corporate finance, but the gist is that creditors have first dibs on assets in a bank

This is what bankruptcy is for. I strongly recommend you read a primer on corporate finance, but the gist is that creditors have first dibs on assets in a bankruptcy (and there may be multiple tiers of creditors), and shareholders usually get wiped out. The tradeoff is that when times are good, shareholders can gain far more than creditors. Now, if creditors really believe that the bad times will only be short-term, the credit markets may refinance the debt, or allow the airlines to issue more debt to cover the existing debt, allowing airlines to avoid bankruptcy, assuming that good times return in a timely fashion, as predicted / hoped. If creditors believe that the bad times will last for the long-term, they can force bankruptcy, and then liquidate the assets in the hopes of recovering as much of their original investment as possible. As mentioned before, shareholders would get wiped out. You said that this would be a "senseless destruction in value," but it's really not that simple. As an example, perhaps the proceeds from the sale of an airline's assets can be invested into promising treatments for COVID. Or perhaps the creditors have debts of their own to repay, and by liquidating the assets of an airline to cover their debts, they prevent a cascade of defaults that could take out an outsize portion of the economy. So it's not actually clear that the net effect on the economy would be a "senseless destruction in value."