Airlines Odds of Being Grounded
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Airlines Odds of Being Grounded
Airlines Odds of Being Grounded
24/7 Wall Street has released odds on the next major airline to go out of business. The website has actually posted odds on the next major bankruptcy across various industries with three major airlines: American, United and Northwest, respectively, being listed among the most vulnerable. '
These are possibilities rather than predictions. 24/7 Wall St. has reviewed a number of large public companies in order to evaluate the possibility of bankruptcies by the end of 2008, based on the current economy. We have run cash flow analysis and looked at balance sheets in the most obvious sectors including financials, airlines, old media, and autos. These numbers are based on the chance of a "Chapter 11" filing or a sudden "implied Chapter 11" event happening in the next six months.
The airline sector is perhaps the most at risk. Many carriers can't operate profitably with $100 oil. With predictions for $150 crude and the price well above $130 per barrel today, Wall Street has already done the math. Add to that the latest round of financial results and all the failed mergers attempts. Cutting capacity and delaying new plane orders can only help in the short term. Chapter 11 is a real risk as it was several years ago without government bail-out funds.
Credit Suisse thinks the airlines can avoid Chapter 11 by cutting capacity...unless oil goes to $150+. Unfortunately, that might happen.
24/7 Wall Street gives American Airlines 1 in 2 odds of going under. United had 1 in 4 odds of going under. Northwest had 5 in 1 odds of going under.
AMR shares have fallen from over $29 to just above $6 during the last year. In the most recent quarter, the company had an operating loss of $187 million and interest expense of $194 million. Long-term debt was over $8.7 billion. Company forecasts fuel expense could rise $790 million over the next year.
UAUA was recently described as an operational mess, and the "worst of the worst" by Portfolio. Shares are off from a 52-week high of $51.60 to $8.25. Like all airlines UAL faces the potential of a sharp drop in traffic if the economy worsens. In its latest quarterly filing, the airline shows fuel costs up 50%. UAL's loss from operations was $441 million. Debt service payments hit $135 million.
NWA has watched its stock fall from $24.25 to $6.94. The company is hoping Delta's purchase of it will help it save costs. But, it is not clear that its unions will go along with personnel cuts or that the merged company can cut a great deal more capacity. Long-term debt of $6.5 billion and running an operating loss.
There may be stronger candidates, however.
Frontier Airlines tends to lead the list of most likely commercial carriers to go kaput next. The airline recently declared bankruptcy. But last week, Frontier announced it was keeping all 70 planes in its fleet and is making payments to stay current on leases and financing agreements.
The carrier was allowed to suspend payments on its aircraft for 60 days after the filing but then had to decide whether to maintain the leases and contracts.
Frontier spokesman Steve Snyder says the airline had to make the payments or the lender could have taken the planes. He declined to say how much the carrier paid to get up to date.
Last week, Frontier said Teamsters Union members had approved temporary wage and benefit concessions designed to help the company emerge from bankruptcy protection. The Denver-based carrier said the union represents about 430 mechanics, tool room employees and others.
In seeking bankruptcy protection, Frontier said credit card processor First Data Corp. sought to hold up to 100 percent of proceeds from ticket sales until flights were completed. First Data previously withheld 50 percent.
Frontier and First Data have since reached a new agreement on the handling of proceeds from ticket sales but have not released details.
Spirit Airlines has also been the subject of bankruptcy speculation. The airline relies heavily on leisure traffic and an "extreme" low cost concept. Spirit announced large job cuts coming in the not-so-distant future.
Midwest Airlines out of Milwaukee is working on a comprehensive restructuring plan that could result in additional service and job cuts. Midwest has hired aviation consultant Seabury Group to help create the plan, according to a memo to employees from Chairman and Chief Executive Timothy Hoeksema. He told employees the restructuring work will be completed within several weeks. In April, Midwest said it would cut 109 employees, amounting to a 3.5% work force reduction. Most of the service cuts are scheduled to take place after the peak summer travel season.
But Midwest may not have much room for additional flight cuts, said Capt. Jay Schnedorf, chairman of the Air Line Pilots Association’s Midwest unit.
“The airline has already downsized,” Schnedorf said. “I have serious concerns as to their ability to downsize much further and realistically expect to remain a viable operation. You can’t shrink to profitability.”
All of the major airlines could be in bankruptcy by early next year if oil prices stay where they are, a new study predicts.
The grim analysis by the consulting firm AirlineForecasts was commissioned by the Business Travel Coalition. Its author concludes that the airline industry is in a full-blown crisis "and heading toward a catastrophe."
The study found that if fuel prices remain high:
•The top 25 carriers will spend more than $28 billion more for fuel this year.
•The major airlines could lose up to $9 billion over the next 12 months.
Any bets on what Airline will be next to fold in Australia?
24/7 Wall Street has released odds on the next major airline to go out of business. The website has actually posted odds on the next major bankruptcy across various industries with three major airlines: American, United and Northwest, respectively, being listed among the most vulnerable. '
These are possibilities rather than predictions. 24/7 Wall St. has reviewed a number of large public companies in order to evaluate the possibility of bankruptcies by the end of 2008, based on the current economy. We have run cash flow analysis and looked at balance sheets in the most obvious sectors including financials, airlines, old media, and autos. These numbers are based on the chance of a "Chapter 11" filing or a sudden "implied Chapter 11" event happening in the next six months.
The airline sector is perhaps the most at risk. Many carriers can't operate profitably with $100 oil. With predictions for $150 crude and the price well above $130 per barrel today, Wall Street has already done the math. Add to that the latest round of financial results and all the failed mergers attempts. Cutting capacity and delaying new plane orders can only help in the short term. Chapter 11 is a real risk as it was several years ago without government bail-out funds.
Credit Suisse thinks the airlines can avoid Chapter 11 by cutting capacity...unless oil goes to $150+. Unfortunately, that might happen.
24/7 Wall Street gives American Airlines 1 in 2 odds of going under. United had 1 in 4 odds of going under. Northwest had 5 in 1 odds of going under.
AMR shares have fallen from over $29 to just above $6 during the last year. In the most recent quarter, the company had an operating loss of $187 million and interest expense of $194 million. Long-term debt was over $8.7 billion. Company forecasts fuel expense could rise $790 million over the next year.
UAUA was recently described as an operational mess, and the "worst of the worst" by Portfolio. Shares are off from a 52-week high of $51.60 to $8.25. Like all airlines UAL faces the potential of a sharp drop in traffic if the economy worsens. In its latest quarterly filing, the airline shows fuel costs up 50%. UAL's loss from operations was $441 million. Debt service payments hit $135 million.
NWA has watched its stock fall from $24.25 to $6.94. The company is hoping Delta's purchase of it will help it save costs. But, it is not clear that its unions will go along with personnel cuts or that the merged company can cut a great deal more capacity. Long-term debt of $6.5 billion and running an operating loss.
There may be stronger candidates, however.
Frontier Airlines tends to lead the list of most likely commercial carriers to go kaput next. The airline recently declared bankruptcy. But last week, Frontier announced it was keeping all 70 planes in its fleet and is making payments to stay current on leases and financing agreements.
The carrier was allowed to suspend payments on its aircraft for 60 days after the filing but then had to decide whether to maintain the leases and contracts.
Frontier spokesman Steve Snyder says the airline had to make the payments or the lender could have taken the planes. He declined to say how much the carrier paid to get up to date.
Last week, Frontier said Teamsters Union members had approved temporary wage and benefit concessions designed to help the company emerge from bankruptcy protection. The Denver-based carrier said the union represents about 430 mechanics, tool room employees and others.
In seeking bankruptcy protection, Frontier said credit card processor First Data Corp. sought to hold up to 100 percent of proceeds from ticket sales until flights were completed. First Data previously withheld 50 percent.
Frontier and First Data have since reached a new agreement on the handling of proceeds from ticket sales but have not released details.
Spirit Airlines has also been the subject of bankruptcy speculation. The airline relies heavily on leisure traffic and an "extreme" low cost concept. Spirit announced large job cuts coming in the not-so-distant future.
Midwest Airlines out of Milwaukee is working on a comprehensive restructuring plan that could result in additional service and job cuts. Midwest has hired aviation consultant Seabury Group to help create the plan, according to a memo to employees from Chairman and Chief Executive Timothy Hoeksema. He told employees the restructuring work will be completed within several weeks. In April, Midwest said it would cut 109 employees, amounting to a 3.5% work force reduction. Most of the service cuts are scheduled to take place after the peak summer travel season.
But Midwest may not have much room for additional flight cuts, said Capt. Jay Schnedorf, chairman of the Air Line Pilots Association’s Midwest unit.
“The airline has already downsized,” Schnedorf said. “I have serious concerns as to their ability to downsize much further and realistically expect to remain a viable operation. You can’t shrink to profitability.”
All of the major airlines could be in bankruptcy by early next year if oil prices stay where they are, a new study predicts.
The grim analysis by the consulting firm AirlineForecasts was commissioned by the Business Travel Coalition. Its author concludes that the airline industry is in a full-blown crisis "and heading toward a catastrophe."
The study found that if fuel prices remain high:
•The top 25 carriers will spend more than $28 billion more for fuel this year.
•The major airlines could lose up to $9 billion over the next 12 months.
Any bets on what Airline will be next to fold in Australia?
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Coping With Sky-High Jet Fuel Prices
