Subprime Mortgage Crisis Helps Bring Down An Airline


This is a story–don’t worry, it will be a short story–about how the current subprime mortgage/credit crisis has actually shot down an entire airline and how this may just be the canary in the coal mine.

The all-business class airline, Maxjet Airways, based in Dulles, gave an extraordinary Christmas gift to its loyal customers: It filed for bankruptcy, ceased to fly and left its customers virtually stranded in London,New York,Las Vegas and Los Angeles. That’s the holiday spirit for you.

Maxjet, mind you, was no American or United Airlines–it actually served food!!–and has been struggling since its inception in 2005.

In my professional role as news reporter, I went out to LAX this afternoon to check things out only to find that Maxjet literally vanished into thin air…well, in L.A. I guess it’s more like thick air.

What was its ticket counter at the Bradley International Terminal was no more; not even a sign telling of its demise. Strangely, the departure sign overhead still listed its 4:50pm flight to England as being “on time.”

Now by this time, you may be thinking, What does all this have to do with the subprime mortgage crisis and why am I reading about an airline on a real estate investing website?

Here’s why:

The company blamed two things as the main reasons the airline folded its wings: the rising cost of jet fuel, and the inability to get more credit to keep its planes flying.


The “credit crunch” as Maxjet put it, is the direct result of the now global, U.S. caused subprime mortgage disaster. The ripple effects from the housing crisis are fast becoming large,crashing waves.

The world’s economy is so interconnected nowadays, that if you drop your ATM card by accident in Chicago, a bank customer in Laos will get hit with the bill for the replacement card.

The credit crisis–which is pretty much what the mortgage debacle has become–is now sapping the strength from businesses entirely unrelated to real estate.

It’s not money, in the 21st century, that makes the world go round, it’s credit. And, as credit stops flowing, the world’s economy –the ENTIRE economy suffers. That is what we are seeing here with the end of Maxjet Airways. A victim of our time and a victim of someone’s unpaid mortgage in Kansas City.

About Author

Charles is currently reporting for KNX Radio in Los Angeles, is the co-author of the book No Time To Think, and can be found commenting about the news on his blog, The Feldman Blog, as well as on The Huffington Post.


  1. Steven Boorstein on

    You’re right in that the subprime mess extends it’s reach far beyond just borrowing for houses. It does affect the ability to obtain credit, overall. However, banks know the difference between business credit and consumer credit and lend “differently” to these groups. I agree that it had made the ability to obtain credit more difficult, but not impossible. If this little airline folded because they couldn’t get credit, although I think the subprime issues may have played apart, I would also assume there were other factors working against it such as poor management, poor vision and strategy, undercapitalization from the get-go, etc.

    I’d hate to blame everthing on subprime. The problem is that the easy credit we had prior to the last year or so created businesses, investors and others who shouldn’t have been able to do the things they were able to do anyway. Tighter credit markets just mean you have to plan better and execute your plan smarter.

    In the end, those who are smart and resourceful are going to be able to succeed. Those who aren’t maybe shouldn’t be doing the business they are doing… survival of the fittest. And I don’t mean that in a mean way, but businesses survive because they thrive. The subprime mess only gave false confidence to those who shouldn’t have been there to begin with, so maybe we should consider ourselves lucky that we had the meltdown at this point than it extending another five years and really imploded things.

    Steven Boorstein
    Landlord Business Insider

  2. When will the crash end? I have read so much from people that are supposed to be giving educated opinions, but they haven’t even been close yet. I would rather people just be honest and say that they truly do not have a clue as to when the market will turn around. It would make things easier for me and those that are looking to buy a home. I have so many clients that ask me is it a good investment, and I’m straight forward with them and say yes as long as you are willing to sit on it for a while.

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