Strategies to Avoid Bankruptcies in the United States Aviation Industry

Abstract

Bankruptcy is a legal process by using which financially distress firms, individuals, and sometimes governments resolve their debts. There might be circumstances in which the entity is unable to pay the debt, during which Bankruptcy law plays it role. The vision of bankruptcy terrifies many, some feel it humiliating and a distressing process, while others find it an escape mechanism from creditors. Bankruptcy is broadly classified into two types, which are debtor’s petition and creditors’ petition. In the case of debtors’ petition, it can be an individual, company or entity who is indebted to another party known as creditor. When faced with financial challenges or any inability to meet the monetary obligations, the debtor has the option to seek bankruptcy protection. Likewise, in a creditors petition, creditors who can be individuals, companies or entities to whom the debtor owes money can issue a statuary demand to prompt payment. Non-compliance with this demand can push creditors to initiate bankruptcy petitions.
The aviation industry has witnessed remarkable evolution, due to the surge in demand for air travel. In the year 2004, approx. 1.9 billion passengers took up to the skies, fast forward to 2025 and this figure has multiplied nearly 5 times to 9.8 billion passengers, which shows a substantial growth in the desire to air travel. Furthermore, the economic significance of aviation industry was truly demonstrated by Air Transport Action Group, which is a global employment of 86.5 million jobs were provided with a colossal contribution of $4.1 trillion to global GDP. These statistics clearly show the industry’s economic impact and its growth trajectory. Entrepreneurs and investors do recognize the potential of aviation sector, with the aim of capitalizing on this growing demand either by establishing new airlines, expanding their operations or addressing problems within existing airlines.
In 2024, among the top 20 airports worldwide based on passenger traffic, 8 of them were from the United States. This shows how United States is playing a vital role in the aviation industry. Despite this, the U.S airline sector has experienced recurrent financial challenges, with 200+ airlines filing for bankruptcy since 1978 airline deregulation act, which is one of the highest compared to other countries. This aim of this study is to find out the key factors which have pushed airlines to file for bankruptcy through the case-study analysis in the U.S industry and how airlines could overcome this failure by focusing on key successful factors, including structure, culture, strategic alliances, planning and forecasting, technology, marketing and branding and outsourcing through semi-structured interviews.