Sterling, R.I.P.

Icelandic-owned Sterling announced today that they are filing for bankruptcy and ceasing all operations. This is the latest development in a bad year for Europe's low-cost airlines.

Check out the airline's statement. Note their depressing refusal to reimburse passengers for booked flights that will now never take off.

Comments

[David]

I'm not that familiar with either Danish or Icelandic law (the company I think is formally based in Iceland), but this probably comes down to the differences in bankruptcy law between the USA and Europe. Traditionally, the US has been debtor friendly - meaning that a company in trouble is given the chance to get its act together by means of Chapter 11 while disavowing itself of its debts. Only if this fails, does Chapter 7 kick in and a company has to shut down.

Europe however is far more creditor friendly. There is no Chapter 11, we have only Chapter 7 (Italy passed a special law this year to change this for Alitalia). Either a company is trading fully, or it's not - there is no 'We screwed up, let's try again but not worry about previous obligations' !

If a company needs to call in the administrators, they generally have a short period of time to solicit bids for any parts of the company - if no bids are expected to be forthcoming, then law usually demands the company ceases trading and begins to wind up.

The accountants get first call on available cash, then staff salaries, then Govt for overdue tax. THEN comes everyone else.

Someone who bought a ticket which has not yet been flown ranks equally in the payout with a fuel supplier. It typically takes a year or more for the liquidators to do their work and anyone in this group to get paid out. If this procedure is not followed, the employees can challenge it in the courts.

Might seem harsh - but it's the way bankruptcy law works in Europe.