In the wake of the 11 September 2001 attacks, confidence in the airline industry unsurprisingly collapsed.
One of the first casualties was Swissair. This came as a surprise to many of us in the airline industry, as SR were always the management standard that others aimed at, but poor management and acquisitions (“hey, aren’t we the best managers in the world, we can turn any basket-case airline around”) (they couldn’t - Sabena and Air Inter being the two main airline related disasters) left the company cut off by it’s creditors.
Anyway, the wheeze. Crossair, a subsidiary of SR and still solvent after the crash bought up the useful bits of SR - the planes, the landing rights, the lounges etc. and relaunched the company as Swiss. The shareholders got nothing, the staff got nothing, and the creditors got very little. But hey, the business continued.
Is this a model that will be used by the banks? Say you have a large American bank with a retail arm and an investment arm. The retail arm is hugely profitable, the retail arm is down to it’s knickers in the strip poker game that is the collapse of structured finance instruments. Why not split the two, let the retail arm merrily go on making money, with the senior management, of course, and let the investment arm and it’s creditors swing in the wind?
Is this likely or are there rules to stop it?