Article - Dark Future for Airlines

[satpak77]

http://dallas.bizjournals.com/dallas/stories/2008/06/09/daily48.html?jst=b_ln_hl


Friday, June 13, 2008 - 9:42 AM CDT
Study: U.S. airlines 'have never faced a darker future'

If gas prices don't fall quickly, the U.S. airline industry will have a "massive failure" that will cause more bankruptcies, including liquidations, according to a study published jointly Friday by AirlineForecasts LLC and the Business Travel Coalition.

The study claims $130 a barrel oil prices will increase airlines' annual costs by $30 billion, but airlines are only able to generate $4 billion in fare increases and incremental fees. Fuel hedge benefits also could offset $5 billion to $6 billion of the increased fuel costs. But the major airlines could face $9 billion in net losses over the next 12 months if the current range of oil prices holds.
The study suggests airline fares will have to increase at least 20 percent just to cover the jump in fuel costs since 2007 -- an impossible increase, given the level of uneconomic seat capacity in the airline system.

At current oil prices, several large and small U.S. airlines will default on their obligations to creditors beginning at the end of 2008 and early 2009, the study predicts, warning the airlines "have never faced a darker future."

"U.S. commercial aviation is in full-blown crisis and heading toward a catastrophe," the study notes. "Airlines are the primary source of inter-city transportation, critical to national and local economic development, the flow of human capital, movement of just-in-time parts for manufacturing, perishable food and other goods critical to our economy. With airlines gravely threatened, so is our economic well-being."

Web site: businesstravelcoalition.com

 

[General Lee]

Yep. Whoever has enough money to outlast this will survive. That is our plan. We will have betwen $6-7 billion in cash after the merger, and hopefully that will do it. Some airlines who go into BK will never come out thanks to lack of DIP financing. Sad but true.


Bye Bye--General Lee

 

[Old School]

I agree that Delta/NWA should be among the last standing, but what was the purpose of writing down $10,000,000,000 in the first quarter?

 

[General Lee]

I agree that Delta/NWA should be among the last standing, but what was the purpose of writing down $10,000,000,000 in the first quarter?

Who knows, but our management is good with "one time charges."

Bye Bye--General Lee

 

[Max Powers]

I agree that Delta/NWA should be among the last standing, but what was the purpose of writing down $10,000,000,000 in the first quarter?

It was a write down of goodwill assets which means basically nothing, other than they completely overestimated the value of the company after the bankruptcy......