Would It Be Better to Let Airlines File for Chapter 11 Bankruptcy?

Last week, Congress passed a $2 trillion economic relief package, the CARES Act, which included up to $50 billion in aid for passenger airlines. An airline may request a direct payroll grant for “the equivalent of their payroll between April 1 and Sept. 30 of last year” and five-year government loans that “would carry tougher terms than grants or loans from private banks.”

But this wasn’t the only option on the table. Richard Squire, a bankruptcy law professor at Fordham University, published an intriguing op-ed in the Washington Post that advocated for letting airline companies file for Chapter 11 bankruptcy in lieu of a taxpayer-funded bailout. 

With 230 million Americans living under “stay-at-home” orders that have required non-essential businesses to shutter (though the definition of “essential” varies by jurisdiction), airlines won’t be the only businesses facing an existential threat before April 30. 

We reached out to Squire to discuss why he favors bankruptcy over federal grants and loans (broadly referred to as “bailouts”) and what options Congress has available moving forward.

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