UAL case

UAL case First of all, there were increases of the operation costs such as employee wage, which consists of the largest expense for an airline, and fuel prices. Secondly, there existed decline in passenger air travel because of the September 11 terrorist attacks. These 2 main reasons made UAL bankrupt. However, the court ordered the firm to reorganize under Chapter 11 rather than liquidation. Compared to liquidation, reorganization process allows the company to operate its business with some restriction. On the other hand, lenders who borrow their money to UAL also have to follow ‘Automatic stay’ which keeps creditors from pursuing their claims. This process prohibits immediate claims on liabilities (including periodic cash payments and an additional or replacement lien on the property) from creditors so that the company (=borrowers) can have some breathing time to continue operating while restructuring its capital structure, or developing a new business plan. Besides, UAL …
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