Airline Finance News - North America

AirGuide Business, April 7, 2008

Apr 7, 2008

Aloha Airgroup, a closely held Hawaiian airline that filed for bankruptcy protection, ended service April 1 when it couldn't find a buyer or financing to stay in business. ATA Airlines, a Midwest carrier based in Indianapolis, shut down the following day when it sought bankruptcy protection, blaming its demise on high fuel prices and the loss of a contract for military charter flights.``Nobody has a long-term viable business plan that can be sustained at these jet-fuel prices,'' said Darryl Jenkins, an airline consultant. ``This is a killer category. We're probably going to see some more casualties out there.'' Apr 4, 2008

Cash reserves will help US large carriers remain stable. Most large airlines have cash reserves that will keep them financially stable as the economy slows and fuel prices rise. One Wall Street analyst said the carriers had amassed $19 billion in cash as of the end of last year. Apr 4, 2008

Soaring fuel prices weaken unions' bargaining power. The weakening U.S. economy is creating a difficult bargaining environment for labor unions. Facing higher fuel costs, some companies are asking unions to renegotiate contracts. Apr 4, 2008

The bankruptcies of two small airlines, Aloha Airgroup Inc. and ATA, give competing carriers the opportunity to add new business flying from the U.S. mainland to Hawaii, although that isn't expected to generate significant new revenue for them.At the same time, the sudden collapse of ATA, a code-sharing partner with Southwest Airlines, puts pressure on the low-cost carrier to find a new partner to fly to markets the low-cost carrier doesn't serve. Apr 4, 2008

The shutdown of ATA Airlines, soon after Aloha Airlines, demonstrates the challenges discount carriers are facing as a result of escalating fuel prices. If discounters scale back their capacity, consumers may find it harder to find inexpensive fares. However, higher fares could help the industry cover the increasing cost of fuel, observers say. Most large airlines have cash reserves that will keep them financially stable as the economy slows and fuel prices rise. One Wall Street analyst said the carriers had amassed $19 billion in cash as of the end of last year. The weakening U.S. economy is creating a difficult bargaining environment for labor unions. Facing higher fuel costs, some companies are asking unions to renegotiate contracts. Apr 4, 2008

Airline executives have said bookings remain strong heading into the busy summer travel season. Although concerns about the economy continue to taint industry outlooks, Calyon Securities analyst Ray Neidl predicted in a March 29 research note that the airline industry would lose more than USD$1 billion this year due to high fuel costs and weaker demand. Airlines, however, are adapting by shrinking operations and cutting growth plans. Last month, Delta said it would cut 2,000 jobs through voluntary buyouts and scale back flights. Apr 2, 2008

Group cuts forecast for carriers, citing high fuel costs. Earnings of domestic and international airlines will drop from $5.6 billion in 2007 to an estimated $4.5 billion in 2008, according to a group that represents airlines. Profits for U.S. carriers could decline from an estimated $2.8 billion last year to $1.8 billion in 2008 because of intense competition and soaring fuel prices, the group said. Apr 1, 2008

Teamsters represent 40,000 airline workers, including 9,000 mechanics and related employees at 11 airlines, including AirTran and Frontier Airlines. Maintenance practices at US carriers have come under close scrutiny. The National Transportation Safety Board is looking at whether crossed wires in braking systems may have caused two United Airlines' Airbus jets to skid off runways in Chicago in October and in Jackson Hole, Wyoming, in February. A check of United's 95 other Airbus A320s turned up one other plane with crossed wires, the carrier said. United said it is working with the NTSB and Airbus. Apr 1, 2008

Airlines fight fuel costs by cutting weight. Airlines are trying to lower their fuel costs by eliminating weight from their aircraft. Some carriers are removing redundant wing lights and selecting snacks that come in lighter packaging, for example. Meanwhile, manufacturers are building planes out of lighter materials. Air Transport Association Chief Economist John Heimlich noted that carriers are facing intense pressure to cut weight as fuel costs climb. "Every penny more per gallon adds $195 million to the industry's expenses per year," he noted. Mar 31, 2008

Ongoing cancellations of flights by major U.S. airlines underscore a growing crisis in U.S. regulatory oversight of airline maintenance programs and practices, according to Kevin Mitchell, chairman of the Business Travel Coalition (BTC). To date, United, American, Southwest and Delta have been impacted.Mitchell is asking for industry-wide support for an appeal to House Transportation Committee Chairman James Oberstar (D-MN) urging a top down, independent review of the Federal Aviation Administration (FAA), which regulates airlines.The BTC says the review should include the FAA's mission, organizational structure, funding, culture and systemic problems. The BTC is encouraging Congress to consider a directive to the National Academy of Sciences and Transportation Research Board to perform the review.The BTC contrasts the speed and efficiency of response to maintenance problems when performed at U.S. maintenance bases to carriers who outsource maintenance in other countries.American and Delta's fast response to problems with their MD-80's fleets, the BTC says, gave FAA personnel ongoing access to maintenance staff, supervisors, aircraft log books, engineers and maintenance control. BTC said this compares favorably to out of country maintenance. Mar 31, 2008