Are the Bankrupt Skies the Friendliest?

Posted: 30 Oct 2009 Last revised: 20 Sep 2012

Federico Ciliberto

University of Virginia - Department of Economics; Centre for Economic Policy Research (CEPR)

Carola Schenone

University of Virginia - McIntire School

Date Written: December 1, 2012

Abstract

We use data from the US airline industry to investigate whether firms that are under bankruptcy protection, as well as these firm's product market rivals, change the quality of the products they offer. We measure the quality of the services offered by a carrier using flight cancellations and delays, and the age of the aircraft used by the carrier. We find that delays and cancelations are less frequent during bankruptcy filings but return to their pre-bankruptcy levels once the bankrupt firm emerges from bankruptcy. We also find that firms use Chapter 11 filings to permanently reduce the age of their fleet. We do not find evidence of statistically and economically significant changes by the airline's competitors along any of the dimensions above.

Keywords: Bankruptcy, Chapter 11, Product market quality, Airline industry

JEL Classification: G33, L13, L93, K2

Suggested Citation

Ciliberto, Federico and Schenone, Carola, Are the Bankrupt Skies the Friendliest? (December 1, 2012). Volume 18, Issue 5, December 2012, Pages 1217–1231, Journal of Corporate Finance. Available at SSRN: https://ssrn.com/abstract=1496519 or http://dx.doi.org/10.2139/ssrn.1496519

Federico Ciliberto

University of Virginia - Department of Economics ( email )

P.O. Box 400182
Charlottesville, VA 22904-4182
United States

Centre for Economic Policy Research (CEPR) ( email )

77 Bastwick Street
London, EC1V 3PZ
United Kingdom

Carola Schenone (Contact Author)

University of Virginia - McIntire School ( email )

Charlottesville, VA 22903
United States
434-924-4184 (Phone)

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