JP Morgan says Major Bankruptcies just a matter of "when" not "if"

[Lear70]

JP Morgan says Major Bankruptcies just a matter of "when" not "if"

NEW YORK (MarketWatch) -- J.P. Morgan downgraded Continental Airlines to underweight from neutral Monday, citing the stock's valuation.

The investment bank lifted its rating on Alaska Air and JetBlue to neutral from underweight, citing their lower risks of bankruptcy due to record-high jet-fuel prices and their ability to withstand a "war of attrition."

Though investors, management and analysts may talk about airlines acting collectively to reduce capacity to firm up revenue, the reality is that they are more likely to dig in and try to out last each other, according to the J.P. Morgan analyst note.

As evidence, the investment bank noted that capacity cuts thus far have fallen far short of what executives have said are necessary, making bankruptcy -- even among the so-called legacy carriers -- a question of when rather than if.

"There will be blood," wrote analyst Jamie Baker in the research report, forecasting a 2008 operating loss for the industry of $7.2 billion, wider then a prior forecast of a loss of $4.6 billion. That would be an all-time record for the industry, he noted.

J.P. Morgan also listed the airlines it thinks are at Chapter 11 risk, from lowest to highest:

Southwest Airlines.
Alaska Airlines
Delta Airlines
airTran
Continental Airlines
JetBlue
American Airlines
United Airlines
Northwest Airlines
USAirways


Further, credit-card companies can represent a much more significant risk to airlines than debt as their ability to impose unilateral holdbacks can exact heavy tolls on liquidity and cash balances, J.P. Morgan said.

Christopher Hinton is a reporter for MarketWatch based in New York.

Interesting list order...

 

[GogglesPisano]

Interesting list order...

I wonder why he was so hard on NWA? They have a lot of cash on hand.

 

[dispatchguy]

I wonder why he was so hard on NWA? They have a lot of cash on hand.

Probably because a lot of it will be wasted trying to merge with DAL.

 

[n757st]

I wonder why he was so hard on NWA? They have a lot of cash on hand.

Same with US Airways, who in 3 years will have one of the youngest fleets in the country.. (Who would have thought that) People might rag on them, but they have a lot of money and a fairly fuel efficient fleet. If any is on the boarder I would think Airtran or United. United might have a lot of cash, but cash doesn't last too long when you are loosing 500 million a quarter.

 

[Colonel Savage]

United might have a lot of cash, but cash doesn't last too long when you are loosing 500 million a quarter.

I assume you're not a fan of the proposed merger?

 

[n757st]

I assume you're not a fan of the proposed merger?

I'm just a lowely regional captain, but I look at the merger and see a lot of pilots on the street, so I would have to lean against it. If there were no pilot jobs lost I think it might not be a bad combo. As much as people like to slam PHL, it is a huge money maker with US Airways controlling the vast majorty of international presence in one of the largest cities in the United States. I think Uniteds massive asian network would complement US Airways CLT and PHL hub and US's large carribean and rapidly growing trans atlantic market. That said if they ever got together I can't see PHX still being a hub, which is a lot of pilots on the street. I don't want to see pilots on the street, be them US west, United, or east guys. I know people at all 3 carriers, and all of them are class acts.

 

[General Lee]

Mergers that do not make sense will not work. You first have to take a look at the route maps to give yourself a good indication. As far as blending seperate cultures, well, as someone on here has said numerous times, big fences create good neighbors?

Looking at UAL and USAir, I think there are too many hubs out West, and IAD is very close to PHL. I just can't see what Parker sees....


Bye Bye--General Lee

 

[PositiveRate]

parker sees the route map after large cuts.

scary times.

 

[reepicheep]

When the industry chatches a cold usair gets pneumonia so if the whole industry has pneumonia....

 

[Ty Webb]

What a Asslehoff!

If any is on the boarder I would think Airtran or United.

And you're basing this on . . . your rejection letters? Or something your Flight Attendant boyfriend told you on your last layover . . . . because it sure isn't based upon any facts.

We now have $500 million in the bank, we're expecting a small profit in Q2, have the lowest non-fuel CASM of any major airline.

So, have yourself a nice little warm cup of STFU and better luck next time . . . .

PS., A "boarder" is someone who lives in someone else's house and pays rent- you know, kind of like you in your parent's basement . . . . a "border" is a dividing line. . . . . :laugh:

 

[Andy]

I wonder why he was so hard on NWA? They have a lot of cash on hand.

He's off the mark on NWA. They're in pretty good shape financially.

 

[slcaviator]

If you think you are going to make a profit in Q2 you must be buying some of SWA's fuel hedges

 

[Lear70]

If you think you are going to make a profit in Q2 you must be buying some of SWA's fuel hedges

It's not us, it's the vast majority of analysts and finance gurus (which I'm not one of and I doubt you are, either); they're all saying pretty much the same thing about airTran - close to break-even or small profit this quarter.

They gave UAir a hard time because of the money they're going to blow trying to make a UAL merger happen and the fact that even though they have quite a bit of cash on hand, they're blowing through it at a pretty steady pace just for daily ops.

It's all relative. If you've got $0.5 Billion in the bank and you're blowing through $250 Million a year, you don't have long until things start getting tight.

Likewise airTran has $500 Million on hand now but is estimating a $100 Million loss for the year unless something changes. Like I said before, airTran is going to have to make some changes if the losses continue to this time next year along this same path, but they have some breathing room left for now.

 

[Superpilot92]

Some "news" numbnut needed to get an article out so they made up some stupid list probably with little to no facts to back it up. NWA has some of the best financials in the industry, there is no question about it. That alone should be enough to discredit this "source".

 

[Lear70]

Some "news" numbnut needed to get an article out so they made up some stupid list probably with little to no facts to back it up. NWA has some of the best financials in the industry, there is no question about it. That alone should be enough to discredit this "source".

Ummm... JP Morgan as a COMPANY press release is a "news numbnut"?

They might have a teensy-weensy little bit of experience calling the market,,, then again, what's a few HUNDRED Billion in an investment bank.

 

[Superpilot92]

Ummm... JP Morgan as a COMPANY press release is a "news numbnut"?

They might have a teensy-weensy little bit of experience calling the market,,, then again, what's a few HUNDRED Billion in an investment bank.

I was calling the author of the article a "news numbnut" not JPMorgan. Putting NWA behind that whole list should be enough to discredit the author. Guess we shall see huh?

 

[McNugget]

Ummm... JP Morgan as a COMPANY press release is a "news numbnut"?

They might have a teensy-weensy little bit of experience calling the market,,, then again, what's a few HUNDRED Billion in an investment bank.

Easy. That's SuperPilot you're talking too. I mean, he/she must be really cool to have a screenname of superpilot.

Every smart person would chose "super" in the screename.

<yes, sarcasm intended>

 

[n757st]

And you're basing this on . . . your rejection letters? Or something your Flight Attendant boyfriend told you on your last layover . . . . because it sure isn't based upon any facts.

We now have $500 million in the bank, we're expecting a small profit in Q2, have the lowest non-fuel CASM of any major airline.

So, have yourself a nice little warm cup of STFU and better luck next time . . . .

PS., A "boarder" is someone who lives in someone else's house and pays rent- you know, kind of like you in your parent's basement . . . . a "border" is a dividing line. . . . . :laugh:

Wow, who pissed in your cheerios this morning. I am sure you are a pleasure to fly with. Do you ever get suspicious that people bid around you? They probably do. I never applied at AirTran not because I don't like the company but rather I have no desire to live in Atlanta. You guys have great pilots (sans you), and sure a low casm... I was just making the statement because I what I had read previously, I guess I forgot about the bonds/stock you guys put out there. Hope you all make it, I was not making a statement of ill will toward your company.

BTW, you like to correct spelling a lot. I am guessing you are a guard nazi too.... huh? Christ, and I thought the skywest fan boys were bad, you bring it to a new level.

 

[Superpilot92]

Easy. That's SuperPilot you're talking too. I mean, he/she must be really cool to have a screenname of superpilot.

Every smart person would chose "super" in the screename.

<yes, sarcasm intended>

Yeah because McNugget is so much better than Superpilot? Superpilot is a screenname on a *gasp* aviation forum, how silly of me.

McNugget is a "super" screename!!

(yes, sarcasm intended)

 

[whymeworry?]

Honestly guys,

Wake up and smell the conspiracy coffee. Jamie Baker and JP Morgan are in bed with mgmt. Who do you think they call when they need to raise capital? Wall Street. Mgmt is telling Baker they are in dire straits to prep us for a massive lowering of expectations. This part of a long-term strategy to reduce costs even further than we would've ever imagined possible in this business.

If JB is so right, what about his reports of 12 mos ago where he was predicting airlines to trade higher? Now that stock prices are down 75% from their highs he wants to come out and downgrade? It's a little too late.

All the legacys can pull down huge amounts of capacity if they need to, and they will if consumers don't pay up for the costs of fuel increases. So far, the passengers aren't balking at higher prices. But indeed it is only natural for demand to subside as prices climb. The only sliver of good news thus far is that point hasn't been reached yet. If oil hits $150-$200 perhaps we'll reach the price-point that cuts demand but the liklihood of it trading to $150 is a hell of a lot less than it trading back down below $100.

Baker is either way too late in making his downgrade recco or he's being manipulated by mgmt to lower all our expectations as we head further into the dark depths of this current crisis.