Airlines have been frequent visitors to the bankruptcy system over the past 20 years. Several airlines have made round trips to the bankruptcy courts. These cases are highly publicized. The most recent large airline bankruptcy filing involves American Airlines. Given the large unionized labor force and impact of labor costs on airline profitability, the disposition of collective bargaining agreements is a significant issue in these cases.
The power to reject executory contracts is one of the important tools utilized by the debtor to reorganize or sell its business in bankruptcy. For most contracts, the debtor merely must show that it exercised reasonable business judgment in deciding to reject a contract.
