Diesel-9
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That's not to say that U.S. airlines suddenly have become pictures of financial health. They have not.
The highest-scoring U.S. carrier among 32 conventional network airlines from around the globe recently ranked by Aviation Week & Space Technology magazine in regards to its financial health was, somewhat surprisingly, Alaska Airlines. Aviation Week's team of aviation financial consultants and analysts considered carriers' liquidity, fuel costs, earnings performance, asset utilization, operating profile and overall financial health. The latter included debt-to-equity ratios, cash balances, access to capital, operating margins and cash flow. Alaska's score was 56. Top-rated Singapore Airlines scored 93.
Southwest, the only U.S. carrier with an "A" credit rating, ranked fifth among 28 discount carriers from around the world, and second among all U.S. carriers, behind Alaska. But as highly regarded as Southwest is in the USA for its consistent profits, its score of 54 was only a little better than average and good enough only for the 20thposition among the total of 60 carriers ranked by Aviation Week.
"The health of the industry remains in question," says Calyon airline analyst Ray Neidl, a member of Aviation Week's team of advisers.
Lower Fuel Prices
Lower fuel prices and the carriers' recent dramatic operational and financial maneuverings have helped ease the crisis, but it has not entirely passed.
Delta and US Airways are moving close to what Neidl calls the bankruptcy/liquidation danger zone based on their cash and short-term investments at the end of June as a percentage of their revenue over the previous 12 months. The danger zone, he says, is a ratio of 10% or less. Delta's cash-to-revenue ratio on June 30 was 16.1%, while U.S. Airways' was 17.4%. Both are addressing that issue.
Balance sheets expected to improve
Delta, where operating costs and performance have improved significantly as a result of its bankruptcy reorganization, should see its ratio rise above 20% upon completion of its pending merger with Northwest, which has a cash-to-revenue ratio of 24.5%. US Airways last week issued $179 million of new shares to shore up its balance sheet.
United, though, remains the closest to Neidl's danger zone, with a 14.1% ratio of cash to revenue. That ratio will rise a few points after United picked up $600 million in cash in July by renegotiating its affinity credit card deal with Chase Bank. Neidl's also concerned that United's projected cash burn for the coming winter will be larger than at most other airlines.
Yet the outlook is not as bad as it was just over a month ago when oil was $147 a barrel and jet fuel was over $4 a gallon on the spot market.
Amazingly, after all they've been through, "airlines still have the ability to raise cash" by issuing stock, negotiating new lines of credit and selling assets, he says.
And they appear able to generate still more revenue.
"All 10 of the large, publicly traded U.S. carriers should be able to make it through this year without defaults (on their loan agreements and covenants), even in a weak economic environment with high fuel costs," he says.
USA Today article.
The highest-scoring U.S. carrier among 32 conventional network airlines from around the globe recently ranked by Aviation Week & Space Technology magazine in regards to its financial health was, somewhat surprisingly, Alaska Airlines. Aviation Week's team of aviation financial consultants and analysts considered carriers' liquidity, fuel costs, earnings performance, asset utilization, operating profile and overall financial health. The latter included debt-to-equity ratios, cash balances, access to capital, operating margins and cash flow. Alaska's score was 56. Top-rated Singapore Airlines scored 93.
Southwest, the only U.S. carrier with an "A" credit rating, ranked fifth among 28 discount carriers from around the world, and second among all U.S. carriers, behind Alaska. But as highly regarded as Southwest is in the USA for its consistent profits, its score of 54 was only a little better than average and good enough only for the 20thposition among the total of 60 carriers ranked by Aviation Week.
"The health of the industry remains in question," says Calyon airline analyst Ray Neidl, a member of Aviation Week's team of advisers.
Lower Fuel Prices
Lower fuel prices and the carriers' recent dramatic operational and financial maneuverings have helped ease the crisis, but it has not entirely passed.
Delta and US Airways are moving close to what Neidl calls the bankruptcy/liquidation danger zone based on their cash and short-term investments at the end of June as a percentage of their revenue over the previous 12 months. The danger zone, he says, is a ratio of 10% or less. Delta's cash-to-revenue ratio on June 30 was 16.1%, while U.S. Airways' was 17.4%. Both are addressing that issue.
Balance sheets expected to improve
Delta, where operating costs and performance have improved significantly as a result of its bankruptcy reorganization, should see its ratio rise above 20% upon completion of its pending merger with Northwest, which has a cash-to-revenue ratio of 24.5%. US Airways last week issued $179 million of new shares to shore up its balance sheet.
United, though, remains the closest to Neidl's danger zone, with a 14.1% ratio of cash to revenue. That ratio will rise a few points after United picked up $600 million in cash in July by renegotiating its affinity credit card deal with Chase Bank. Neidl's also concerned that United's projected cash burn for the coming winter will be larger than at most other airlines.
Yet the outlook is not as bad as it was just over a month ago when oil was $147 a barrel and jet fuel was over $4 a gallon on the spot market.
Amazingly, after all they've been through, "airlines still have the ability to raise cash" by issuing stock, negotiating new lines of credit and selling assets, he says.
And they appear able to generate still more revenue.
"All 10 of the large, publicly traded U.S. carriers should be able to make it through this year without defaults (on their loan agreements and covenants), even in a weak economic environment with high fuel costs," he says.
USA Today article.
TC
