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: