AIRLINE NEWS
Tuesday, June 24, 2008
Fuel costs could 'devastate' airlines
The skyrocketing price of fuel could "devastate" the airline industry and hurt the economy, according to a report from the Business Travel Coalition released Monday.
Pressured by rising fuel costs, major airlines could collapse as early as this year, the coalition said. The failure of just one airline could disrupt travel for 200,000 to 300,000 daily passengers and cause between 30,000 and 75,000 immediate job losses, said the coalition.
The failure of more than one airline could result in 100,000 job losses, said the report, particularly in such hubs as Atlanta for Delta Air Lines, Chicago for UAL Corp.'s (UAL) United Airlines and Continental Airlines' Houston.
"Already depleted cash reserves are dwindling fast, and unless the fuel crisis lessens, airlines face not the now familiar protracted restructuring in bankruptcy, but outright and immediate extinction," said the report.
Business travel would be disrupted, as would the airborne supply chain for goods like pharmaceuticals, electronics and auto parts.
Rising fuel costs hit airlines hard. Fuel expenses are expected to total $61.2 billion this year, compared to $41.2 billion in 2007, according to the Air Transport Association.
Some major airlines, such as Northwest Airlines, United Airlines, Delta and U.S. Airways, continue to operate despite filing for bankruptcy in the last several years. But the credit crisis would make it harder for a bankrupt airline to keep operating while trying to restructure its business, according to the coalition.
The lack of bankruptcy financing is part of the reason why smaller airlines like Aloha, ATA, Champion, Eos and Skybus recently stopped operating, said the report.
Analysts who cover the industry disagreed that a major carrier would crumble this year, because the airlines still have enough cash to survive into 2009.
"I think it's more likely that any large airline bankruptcies would occur next year," said Philip Baggaley of Standard & Poor's, who has assigned his lowest ratings to U.S. Airways, AirTran Airways and JetBlue Airways. "At least at current fuel prices, most of them have enough liquidity to get through several more quarters. But it could get rather more uncomfortable by 2009. Oil prices are the largest variable."
Robert Mann Jr., an industry consultant, said the airlines have enough cash to ward off collapse for this year, and that capacity cuts should help them survive.
"The cuts in flying are designed to cut cash loss and that's what I hope happens," said Mann.
Raymond Neidl of Calyon Securities agreed that the airlines have enough cash to avoid disaster in the near future, though he expects that the number of carriers will shrink through consolidation.
"Nobody's going into bankruptcy this year," said Neidl. "Airlines die slow, and they always seem to come up with the cash to keep going."
Delta plans to acquire Northwest Airlines, though the merger is yet to be finalized.
Source: money.cnn.com
Pressured by rising fuel costs, major airlines could collapse as early as this year, the coalition said. The failure of just one airline could disrupt travel for 200,000 to 300,000 daily passengers and cause between 30,000 and 75,000 immediate job losses, said the coalition.
The failure of more than one airline could result in 100,000 job losses, said the report, particularly in such hubs as Atlanta for Delta Air Lines, Chicago for UAL Corp.'s (UAL) United Airlines and Continental Airlines' Houston.
"Already depleted cash reserves are dwindling fast, and unless the fuel crisis lessens, airlines face not the now familiar protracted restructuring in bankruptcy, but outright and immediate extinction," said the report.
Business travel would be disrupted, as would the airborne supply chain for goods like pharmaceuticals, electronics and auto parts.
Rising fuel costs hit airlines hard. Fuel expenses are expected to total $61.2 billion this year, compared to $41.2 billion in 2007, according to the Air Transport Association.
Some major airlines, such as Northwest Airlines, United Airlines, Delta and U.S. Airways, continue to operate despite filing for bankruptcy in the last several years. But the credit crisis would make it harder for a bankrupt airline to keep operating while trying to restructure its business, according to the coalition.
The lack of bankruptcy financing is part of the reason why smaller airlines like Aloha, ATA, Champion, Eos and Skybus recently stopped operating, said the report.
Analysts who cover the industry disagreed that a major carrier would crumble this year, because the airlines still have enough cash to survive into 2009.
"I think it's more likely that any large airline bankruptcies would occur next year," said Philip Baggaley of Standard & Poor's, who has assigned his lowest ratings to U.S. Airways, AirTran Airways and JetBlue Airways. "At least at current fuel prices, most of them have enough liquidity to get through several more quarters. But it could get rather more uncomfortable by 2009. Oil prices are the largest variable."
Robert Mann Jr., an industry consultant, said the airlines have enough cash to ward off collapse for this year, and that capacity cuts should help them survive.
"The cuts in flying are designed to cut cash loss and that's what I hope happens," said Mann.
Raymond Neidl of Calyon Securities agreed that the airlines have enough cash to avoid disaster in the near future, though he expects that the number of carriers will shrink through consolidation.
"Nobody's going into bankruptcy this year," said Neidl. "Airlines die slow, and they always seem to come up with the cash to keep going."
Delta plans to acquire Northwest Airlines, though the merger is yet to be finalized.
Source: money.cnn.com
Labels: bankruptcy, fuel, US
Sunday, June 01, 2008
Return flight to bankruptcy possible for U.S. airlines
ATLANTA - Airlines are cutting U.S. flights, shedding employees, putting off plane orders and even talking about combinations.
But with cash bleeding fast, fuel prices high and credit tight, nothing they do may be able to stop several major airlines' return flight toward bankruptcy, and possibly liquidation.
Unlike when four of the six legacy carriers filed for bankruptcy protection between 2002 and 2005, airlines facing bankruptcy in this climate may find it tougher to reorganize because of tight credit markets and they have fewer unencumbered assets to use as collateral for loans.
"It may be Darwin's law of the fittest. If one of the carriers goes into bankruptcy and liquidated, it would take a lot of seats out of the market and other carriers would benefit," Calyon Securities airline analyst Ray Neidl said.
A handful of small carriers in recent months have filed for bankruptcy protection or gone out of business altogether.
With losses piling up for most of the major airlines, maintaining a strong cash position is important to avoid the same fate.
Spiralling fuel costs and limited means to trim other costs quickly makes that a tricky proposition.
"Unlike 2002, 2003, 2004, when it was largely a revenue problem that drove them into distress, this is largely a fuel price problem," said Fitch Ratings analyst Bill Warlick. "You could argue that the risk associated with fuel price spikes is largely uncontrollable in contrast to the revenue problem post 9/11, which was addressed through a variety of measures such as cutting costs."
Several of the carriers used their first trip through bankruptcy protection to wipe away debt, resize their fleets and terminate employee pensions.
"There are fewer opportunities to restructure now that the initial work is done," Warlick said.
American Airlines, the largest U.S. carrier, teetered on the verge of bankruptcy before winning employee concessions in 2003. Because of high pension and debt obligations, as well as the hefty price of fuel, the unit of Fort Worth, Texas-based AMR Corp. is again facing the possibility of a future cash crunch.
It had US$4.5 billion in unrestricted cash at the end of March, but Neidl projects that AMR could have a negative cash balance by the end of 2009 if oil prices remain at the current level of roughly $130 a barrel. Covenants on some of American's debt require the airline to maintain at least $1.25 billion in unrestricted cash at the end of each quarter through at least the middle of next year.
At the current fuel price level, Chicago-based UAL Corp., parent of United Airlines, and Tempe, Ariz.-based US Airways Group Inc., both of which have had trips through Chapter 11, also face the potential for precarious cash positions by the end of next year, according to Neidl's projections. Fitch Ratings said Thursday that US Airways would face a growing risk of violating one of its debt covenants if adverse fuel trends persist through the remainder of this year.
The debt covenant issue wouldn't necessarily force a bankruptcy filing, as airlines could re-negotiate debt agreements with lenders or sell assets to pay off debt. Neidl believes airlines would take drastic actions before the end of 2009 if current fuel trends continue.
Having few assets that aren't already being used as collateral on existing loans and the tight credit markets could make it difficult for US Airways, for instance, to raise financing to allow it to reorganize in bankruptcy if it had to file for the third time since 2002, Warlick said, adding that under those circumstances liquidation could result.
US Airways declined to make an executive available to discuss the airline's financial situation.
Atlanta based Delta Air Lines Inc. and Eagan, Minn. based Northwest Airlines Corp., which are seeking to combine, had a combined total of $5.8 billion in unrestricted cash at the end of March, but at current fuel prices Neidl projects that could dwindle significantly by the end of next year. Delta also has said it expects to incur $1 billion in one-time integration costs from its acquisition of Northwest. Both Delta and Northwest exited Chapter 11 bankruptcy protection just last year.
Neidl's cash projections include unrestricted cash and short term investments, but exclude auction-rate securities.
The airlines are furiously trying to remove domestic flights from the air to reduce costs. At least two have announced plans to cut U.S. capacity by double digit percentages and trim thousands of jobs. Others are putting off buying certain new planes.
The price of oil has doubled in the last year. But fare increases have fallen well short of keeping pace with the price of fuel. As their finances have been buffeted, stocks of most major airlines have plummeted by double digit percentages over the last year.
"Obviously, there are things that are outside of our control," said Beverly Goulet, American's vice-president of corporate development and treasurer. "The first thing that comes to mind is the price of jet fuel."
But Goulet said American, by cutting U.S. capacity, imposing new fees on travellers and taking other measures, has been working hard to position itself to remain viable in the current economic and fuel environment. The airline currently isn't considering bankruptcy.
"It's an interesting reflection on perceptions out there to hear people talk about the benefit of walking away from obligations," Goulet said. "Would it be easy to walk away from debt? Yes. But as a manager of this business, as people who take on obligations to those stakeholders, we don't think that's the appropriate way to think about those kinds of tactics."
Goulet said the airline industry will have to change in the face of persistently high fuel prices, and she insisted American doesn't plan to give up.
Neidl said in a recent research note that mergers, which are supposed to make the industry more efficient, may not work in the current environment because there is a large cash outlay up front and high execution risk. He believes the current crisis, which he described as the biggest challenge the industry has ever faced, may serve to cool the merger frenzy.
For their part, Delta and Northwest insist they are pushing ahead with their plans to combine in a stock swap deal that would create the world's largest carrier, and officials dismissed speculation by some analysts that Delta could possibly walk away from the deal. United and US Airways had been discussing a possible combination of their own, but on Friday the companies said there won't be an agreement "at this time."
Source: news.google.com
But with cash bleeding fast, fuel prices high and credit tight, nothing they do may be able to stop several major airlines' return flight toward bankruptcy, and possibly liquidation.
Unlike when four of the six legacy carriers filed for bankruptcy protection between 2002 and 2005, airlines facing bankruptcy in this climate may find it tougher to reorganize because of tight credit markets and they have fewer unencumbered assets to use as collateral for loans.
"It may be Darwin's law of the fittest. If one of the carriers goes into bankruptcy and liquidated, it would take a lot of seats out of the market and other carriers would benefit," Calyon Securities airline analyst Ray Neidl said.
A handful of small carriers in recent months have filed for bankruptcy protection or gone out of business altogether.
With losses piling up for most of the major airlines, maintaining a strong cash position is important to avoid the same fate.
Spiralling fuel costs and limited means to trim other costs quickly makes that a tricky proposition.
"Unlike 2002, 2003, 2004, when it was largely a revenue problem that drove them into distress, this is largely a fuel price problem," said Fitch Ratings analyst Bill Warlick. "You could argue that the risk associated with fuel price spikes is largely uncontrollable in contrast to the revenue problem post 9/11, which was addressed through a variety of measures such as cutting costs."
Several of the carriers used their first trip through bankruptcy protection to wipe away debt, resize their fleets and terminate employee pensions.
"There are fewer opportunities to restructure now that the initial work is done," Warlick said.
American Airlines, the largest U.S. carrier, teetered on the verge of bankruptcy before winning employee concessions in 2003. Because of high pension and debt obligations, as well as the hefty price of fuel, the unit of Fort Worth, Texas-based AMR Corp. is again facing the possibility of a future cash crunch.
It had US$4.5 billion in unrestricted cash at the end of March, but Neidl projects that AMR could have a negative cash balance by the end of 2009 if oil prices remain at the current level of roughly $130 a barrel. Covenants on some of American's debt require the airline to maintain at least $1.25 billion in unrestricted cash at the end of each quarter through at least the middle of next year.
At the current fuel price level, Chicago-based UAL Corp., parent of United Airlines, and Tempe, Ariz.-based US Airways Group Inc., both of which have had trips through Chapter 11, also face the potential for precarious cash positions by the end of next year, according to Neidl's projections. Fitch Ratings said Thursday that US Airways would face a growing risk of violating one of its debt covenants if adverse fuel trends persist through the remainder of this year.
The debt covenant issue wouldn't necessarily force a bankruptcy filing, as airlines could re-negotiate debt agreements with lenders or sell assets to pay off debt. Neidl believes airlines would take drastic actions before the end of 2009 if current fuel trends continue.
Having few assets that aren't already being used as collateral on existing loans and the tight credit markets could make it difficult for US Airways, for instance, to raise financing to allow it to reorganize in bankruptcy if it had to file for the third time since 2002, Warlick said, adding that under those circumstances liquidation could result.
US Airways declined to make an executive available to discuss the airline's financial situation.
Atlanta based Delta Air Lines Inc. and Eagan, Minn. based Northwest Airlines Corp., which are seeking to combine, had a combined total of $5.8 billion in unrestricted cash at the end of March, but at current fuel prices Neidl projects that could dwindle significantly by the end of next year. Delta also has said it expects to incur $1 billion in one-time integration costs from its acquisition of Northwest. Both Delta and Northwest exited Chapter 11 bankruptcy protection just last year.
Neidl's cash projections include unrestricted cash and short term investments, but exclude auction-rate securities.
The airlines are furiously trying to remove domestic flights from the air to reduce costs. At least two have announced plans to cut U.S. capacity by double digit percentages and trim thousands of jobs. Others are putting off buying certain new planes.
The price of oil has doubled in the last year. But fare increases have fallen well short of keeping pace with the price of fuel. As their finances have been buffeted, stocks of most major airlines have plummeted by double digit percentages over the last year.
"Obviously, there are things that are outside of our control," said Beverly Goulet, American's vice-president of corporate development and treasurer. "The first thing that comes to mind is the price of jet fuel."
But Goulet said American, by cutting U.S. capacity, imposing new fees on travellers and taking other measures, has been working hard to position itself to remain viable in the current economic and fuel environment. The airline currently isn't considering bankruptcy.
"It's an interesting reflection on perceptions out there to hear people talk about the benefit of walking away from obligations," Goulet said. "Would it be easy to walk away from debt? Yes. But as a manager of this business, as people who take on obligations to those stakeholders, we don't think that's the appropriate way to think about those kinds of tactics."
Goulet said the airline industry will have to change in the face of persistently high fuel prices, and she insisted American doesn't plan to give up.
Neidl said in a recent research note that mergers, which are supposed to make the industry more efficient, may not work in the current environment because there is a large cash outlay up front and high execution risk. He believes the current crisis, which he described as the biggest challenge the industry has ever faced, may serve to cool the merger frenzy.
For their part, Delta and Northwest insist they are pushing ahead with their plans to combine in a stock swap deal that would create the world's largest carrier, and officials dismissed speculation by some analysts that Delta could possibly walk away from the deal. United and US Airways had been discussing a possible combination of their own, but on Friday the companies said there won't be an agreement "at this time."
Source: news.google.com
Labels: bankruptcy, merger, US
Sunday, April 13, 2008
Frontier Airlines Not Grounded Yet
High traffic and strong March sales are not enough to make Frontier Airlines soar. The budget airline, like many others, is filing for bankruptcy - but this time, cautious creditors are thrown in the mix.
forbes.com
forbes.com
Labels: bankruptcy, frontier airlines
Friday, April 04, 2008
ATA Airlines Discontinues Operations
ATA Airlines last night filed a petition for Chapter 11 bankruptcy protection and this morning discontinued all of its operations. ATA said an "unexpected cancellation" of a military charter contract, provided through an agreement with FedEx, dried up its capital and necessitated the stop in service.
btnmag.com
btnmag.com
Labels: ata airlines, bankruptcy
Tuesday, April 01, 2008
Aloha Airlines shutting down passenger operations
Aloha Airlines is shutting down its passenger operations less than two weeks after the Honolulu based company filed for bankruptcy protection as a court seeks buyers for its remaining units.
reuters.com
reuters.com
Labels: aloha airlines, bankruptcy
Saturday, March 22, 2008
Aloha Airgroup files for bankruptcy protection
Aloha Airgroup Inc, the parent of Aloha Airlines Inc, has filed for bankruptcy protection and blamed "predatory pricing" by competitor Mesa Airlines for its troubles.
reuters.com
reuters.com
Labels: aloha airlines, bankruptcy
Friday, July 20, 2007
Delta profit beats Street forecast
Delta Air Lines Inc. cited a 5.5 percent gain in sales as it reported today that it swung to a profit in the second quarter, which saw it emerge from bankruptcy after shaving billions of dollars in costs.
news.cincypost.com (page not found)
news.cincypost.com (page not found)
Labels: bankruptcy, Delta, profit
Friday, May 18, 2007
Northwest gets okay for bankruptcy exit
Northwest Airlines will exit its Chapter 11 bankruptcy on May 31 with $2.5 billion in annual cost savings.
cnn.com (page not found)
cnn.com (page not found)
Labels: bankruptcy, exit, Northwest Airlines
