Re: bankruptcy questions

["David B. Shemano" <dshemano@xxxxxxxxxx>]

Michael Perelman writes:

>> The basic flaw is that the cost of flying one more passenger is minimal.  According
>> to basic economic theory, competition drives prices down to that level, which cannot
>> support the fixed costs.

I suppose the same problem theoretically exists for hotels, theaters, cruise ships.  Again, I don't see any evidence that entrepeneurs, investors, lenders, etc. agree with that it is impossible to make money in these industries.

It is a metaphysical certainty that at a certain level of fixed cost, the investment will lose money.  But there is going to be an income stream, and that income stream is going to be profitable assuming a certain level of fixed debt.  If the fixed debt is too high, that's what bankruptcy reorganization is for.

David Shemano