Airways Chapt 11 rumor
The following text from a recent Aviation Daily article gives weight to the current Airways Chapter 11 bankruptcy rumor. (It's the only way the company will ever get scope relief). Read on.... .AVIATION DAILY February 5, 2002. .Copyright 2002 by The McGraw Hill Companies, Inc.
Regionals, Low-Fare Airlines. .Face Post-Sept 11 Challenge
Regional carriers continue to make growth plans and remain optimistic about the future of the economy and the industry, according to speakers at last week’s Raymond James Growth Airline Conference in New York. Raymond James analyst James Parker said about $1 billion worth of business had shifted to regionals and continues accelerating because of Sept 11. He predicted that fixed-fee contracts are not likely to be substantially altered, even if a major partner goes bankrupt. Parker said fixed-fee contracts are revenue builders and remain part of the solution to profitability problems. Bankruptcy gives the majors more flexibility in their pilot scope provisions to use regionals. While air travel will “largely recover by mid-2002, we do not expect the majors to rebuild to 100% of their pre-Sept 11 flying, which should leave several billion in incremental market share for regional and low-fare airlines over the next few years.”
Parker said low-fare airlines will be the prime beneficiaries of the majors’ capacity reductions “because once airline industry traffic recovers, the majors are expected to bite the bullet on much of their low-priced, discretionary traffic.” Lower priced, discretionary traffic”. Lower priced traffic has become unprofitable for the majors, Parker said, because of rapidly rising labor costs and the proliferation of low-cost airlines, such as Southwest and Jet Blue. Stock prices among the low-fare carriers have climbed since Sept. 10, he said. AirTrans stock as of Jan. 23 was up 4%, Frontiers was up 58%, and Ryanair’s had climbed 32%. United’s stock price, in contrast, dropped 52% and US Airways 56%. US Airways partner Mesa saw its stock price drop 43% in that period, and SkyWest, which flies for United and Delta, had a 13% decline in it’s stock price.
End.