American airline industry in a serious crisis

July 16, 2008 · Filed Under Airlines

NEW YORK- Stagnating passenger numbers and persistently high prices for aviation fuel have in the first half of 2008 verheerend on the business figures of the American airline industry impact. A recent study says a new wave of insolvency in the aviation sector ahead at the end of which is not successfully completed creditor protection proceedings under Chapter 11, but company to Chapter 7 resolutions are.

By the end of this year and 2009, according to Airline Forecasts and the Business Travel Coalition study carried out in a Verharren of the crude oil price to 130 U.S. dollars per barrel medium and large U.S. airlines their creditors can no longer satisfy. “The American Airlines see with increasing concern how their cash move to zero”, the paper describes the situation.

American Airlines

A judicially supervised Reorganize of business processes in the eleventh section of the U.S. bankruptcy law, as several U.S. airlines after the 11 to September 2001 following sectors perceived crisis, this is not expected. “The airlines have almost all the leeway to reduce costs already exhausted,” said Branch of the Association of American Airlines ATA. The sector faces “fundamental business problems.”

The ten largest airlines in the United States will this year up to 25 billion U.S. dollars more for aviation fuel expend than 2007. Even under exhausting all financial instruments to hedge the cost of this amount could be only five to six billion U.S. dollars can be saved.

The entire U.S. airline industry will be under the bar up to 30 billion U.S. dollars higher costs. This sum is additional revenue from an increase in surcharges and ticket prices of only four billion U.S. dollars. Large airlines, the emerging financing gaps still by the inclusion of fresh capital and debt financing of new aircraft by manufacturers.

As far as the situation on the commodity markets but not sustainable relaxed, traditional companies were also from a threatened collapse. “With an average price of 135 U.S. dollars per barrel of crude oil could the airlines shut down 1,000 machines and 80,000 jobs would be abolished and still can not fly profitably,” says the study.

2007 will be the only year of the current decade left the industry in which a surplus flight industry. For 2008, expects the study in the ten largest airlines in the country, with total losses of 9.6 billion U.S. dollars, for 2009 with a minus of 8.0 billion U.S. dollars. Only Southwest Airlines will be in two years gains balance. In the first months of this year had in the United States already airlines Aloha Airlines, ATA and SkyBus into liquidation.

The participated in the study institutions across Europe in the light of the results that intervention by the policy.