This paper is a review of Ciliberto and Schenone (2008), where it is empirically tested the hypothesis that airlines enter the US Chapter 11 regime for bankrupts as a result of fierce competition in capacity. The authors present empirical evidence that a bankruptcy state may emerge from a war of attrition using capacity as the strategic variable, with losers ultimately increasing their debts considerably. Authors also discuss the impacts on operational costs, and argue that neither during nor after the Chapter 11 period the cost of bankrupt airlines are affected.
