# What other airlines are in trouble?



## Carolinian (Apr 5, 2008)

With ATA, Aloha, and now SkyBus going belly up this week, what other airlines might be going under?

I suspect most European airlines, both legacies and LCC's are okay because they pay for fuel and charge fares in pounds, francs, €, crowns, etc.  Alitalia is probably an exception however, if the deal for AF to buy them falls through, although they were in trouble long before the fuel price spiked.

Among US-based legacies, I read that NW has the best cash position - cash on hand as a percentage of annual revenues.  That probably has something to do with why DL is trying to take them over, which hopefully won't happen.


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## Dave M (Apr 5, 2008)

According to yesterday's Wall Street Journal, some of the airlines in jeopardy, in addition to Alitalia, include Sun Country and Frontier. Other smaller carriers that have reined in growth recently include Skybus (which was still operating when the WSJ article was written!) and JetBlue. Even new carrier Virgin America has already revised its business plan. And Spirit is losing money.

Most of the big U.S. carriers, including Northwest, United and Delta, have announced plans to reduce the number of flights in their schedules later this year. If demand stays high, those reductions, along with cutbacks, losses and disappearances among low-cost carriers, will make it easier for the large airlines to significantly increase prices.

I think it's a good bet that airfares for the latter part of 2008 will be sky-high compared with last year.


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## rickandcindy23 (Apr 5, 2008)

Dave, you are right about Frontier.  When we flew in February, the flight attendants on our flight said that handing out a second napkin to a passenger was a big no-no.  She wasn't joking, either.  I think if airlines need more money for fuel, they ought to make a gentlemen's agreement to raise all of the prices the same, taking out the competition for a while.  I would rather pay $50 more and get a flight on my favorite airline, rather than get a bargain price because one is undercutting the other to drive competition out of business.  

Hey, I know about the free market and the capitalistic society we live in, but in a crisis like we are having right now with fuel costs, something has to give.  Plus, we have about 12 RT award tickets on Frontier we need to use before they go belly up.  I would give up half of those to keep them flying, too.


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## Werner (Apr 5, 2008)

One lesson that seems to come out of this week's bankruptcies is that when small airlines run out of operating cash they declare bankruptcy and shut down but large carriers can default on their debt, declare bankruptcy and continue to operate in Chapter 11.  The reason is that their debt load is so high that their creditors have to let them operate in order to recoup even a part of their investment.  Small carriers don't have that leverage.  For personal travel perhaps that means that we should let the smaller airlines keep pricing pressure on the big airlines but don't actually buy tickets from them.  Let the business traveler's do that.  

A few years ago during some of the large carrier bankruptcies I read that no major US airlines has returned a positive return on equity since deregulation.  Why anyone invests in them is a mystery.  I agree with the statement above that maybe its time revisit the notion of deregulation for airlines.  We are approaching the point of monopoly pricing power in the few remaining a carriers.  Also the notion that air transportation is a free market is obsolete at this stage.  Air transportation is a utility and should be regulated like one.


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## Carolinian (Apr 6, 2008)

Competition is working just fine in Europe, where large and profitable LCC's like EasyJet and RyanAir offer rock bottom prices.

Regulation is not the answer.  It is strengthening the dollar.  European airlines are buying fuel and chargin fares in stronger currencies, which generally ride up with oil, not the steadily declining dollar, which declines as oil rises.


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## Ann-Marie (Apr 6, 2008)

I am a little nervous about booking my airline right now for 331 days out.  I think I might wait and hope for the best.


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## ownsmany (Apr 6, 2008)

uh oh. 

We are flying on Jet Blue in June.  I'm thinking about buying another ticket for someone to join us.  You think I'd be ok?  Hate to lose money on the tickets - and even worse not be able to make our Aruba trip.


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## dioxide45 (Apr 6, 2008)

rickandcindy23 said:


> I think if airlines need more money for fuel, they ought to make a gentlemen's agreement to raise all of the prices the same, taking out the competition for a while.



This would be the equivalent of price fixing. I think what is happening now is what is best for the consumer. The market and prices will right themselves as airlines go under. Sure people will be inconvenienced by the cancellation of their flights, but in the end it will even itself out.


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## bogey21 (Apr 6, 2008)

I have a flight on Mesa Wednesday and am crossing my fingers.  Otherwise I'll stick to American and Southwest exclusively

GEORGE


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## UWSurfer (Apr 6, 2008)

ownsmany said:


> uh oh.
> 
> We are flying on Jet Blue in June.  I'm thinking about buying another ticket for someone to join us.  You think I'd be ok?  Hate to lose money on the tickets - and even worse not be able to make our Aruba trip.



My initial feeling is that you'll be fine.   However, I just got back from Hawaii, where I flew Aloha just 48 hour prior to them shutting down and had tickets back on ATA which shut down 72 hours prior to our flight departing.  That is to say my instincts havn't been too good of late. 

Actually what I've noticed is Jet Blue's pricing in the past year or so hasn't been any better than Southwest.  Whether that means they are in better shape because they aren't underpricing their flights or an indicator of something else, I couldn't say.


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## camachinist (Apr 6, 2008)

I know there's a whole bunch of UA FF'ers who'd love to see Messy (Mesa) go and their contracts get picked up by Skywest or Shuttle America. I've spent considerable flight time talking to Skywest and S/A employees and am impressed with their views of their respective corporate cultures. The in-flight service on both regionals has IMO been uniformly impressive.

For a lot of reasons, I think Mesa will be the next to go. I'm hopeful, anyway 

Pat


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## skim118 (Apr 6, 2008)

Ultimately we need one of the majors like AA, United, Delta, Continental  to go under and stay under and not get resurrected;  maybe the fares will increase but at least the remaining airlines can get some sensible pricing and actually re-invest the profits in their fleet.

We love American, but I wonder how long can they keep their gas-guzzling fleet(MD-80, 757's from TWA, 767) up in the air & it's been ages since they have placed any major fleet purchases.


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## jmatias (Apr 6, 2008)

All this bad news about airlines makes me feel like I better use up all my FF miles sooner than later.

Already lost a bunch with Aloha.  Would hate to lose more. 

Jen


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## T_R_Oglodyte (Apr 6, 2008)

dioxide45 said:


> This would be the equivalent of price fixing. I think what is happening now is what is best for the consumer. The market and prices will right themselves as airlines go under. Sure people will be inconvenienced by the cancellation of their flights, but in the end it will even itself out.



Yep - in a market in which none of the players is making money, the weakest get eliminated.  When the excess capacity is removed, the strongest companies remain.

The situation that I see with the major airlines is that Southwest (and others) demonstrated it was profitable to operate an airline with a lower cost structure than was in place with the legacy carriers.  The process of Chapter 11 bankruptcy reorganizations has largely involved the legacy carriers reducing their operating costs - a Chapter 11 reorganization has generally been the only effective way for an airline to make significant changes in labor costs.

Once all of the carriers have shed costs, the next rounds of bankruptcies will involve shutting down capacity, as appears to be the case in Hawai'i with Aloha.  With the capacity off the market, fares will rise to the point where the surviving carriers operate profitably.


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## dougp26364 (Apr 6, 2008)

I was reading through some of the news articles on Airwise.com and it seems the only two airlines that are of a concern are Frontier and Airtran. Largely due to their (or lack of) cash positions.

I completely agree about wanting Mesa out of the game. Nasty little regional carrier that couldn't care less about customer service. I learned quickly to try to avoid carriers that used them to fly out of Wichita. At that time it was mostly America West, now USAir. Frontier used them as well and, since Mesa didn't want the route from Wichita to Denver, they did everything in their power to NOT fly the route. On one trip I finally had to rent a car in Denver and drive home because they would not land in Wichita, blaming the weather. The problem was, everyone else was landing their CRJ's without to much trouble. Not Mesa, fly over, take a look and fly back. The second attempt they didn't even make it out of CO before turning back and saying they coudln't land. 

One time I was sitting at the gate looking directly at the plane that was suppose to take me home but, they were leaving. In frustration I called Frontier to ask them what the heck was going on. I was put on hold for a few minutes. When they came back they said they had called Mesa and was told there wasn't any plane at the gate. I corrected her telling her I was looking right at the plane. I was put on hold again and, when she came back, she had called the tower to find out who was telling the truth. It didn't get me home any sooner but maybe it at least made Frontier a little more aware the Mesa wasn't exactly an honest airline.


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## JudyS (Apr 6, 2008)

Well, I guess I should be glad that I never booked that December week in Hawaii that I was eyeing a week or so ago.  Who knows what it will cost to get there now, with two Hawaiian carriers going belly up? 

I have a cheap flight to Orlando on Spirit for this fall.  I hope they'll still be around then!



rickandcindy23 said:


> D.... I think if airlines need more money for fuel, they ought to make a gentlemen's agreement to raise all of the prices the same, taking out the competition for a while.  I would rather pay $50 more and get a flight on my favorite airline, rather than get a bargain price because one is undercutting the other to drive competition out of business.....


As Dioxide45 noted, this is price-fixing.  Regardless of whether it would be a good thing or a bad thing, it is definitely forbidden by federal law.  Currently, the airlines could go to set prices only if the government re-institutes airline regulation (which was discontinued in the 1980s.)



Werner said:


> ....the notion that air transportation is a free market is obsolete at this stage.  Air transportation is a utility and should be regulated like one.


I've never really though of air transportation as a utility, although of course other forms of transportation are heavily regulated and/or subsidized.  (It's not as if most roads are privately owned, for example.)   Air transportation as a utility is an interesting thought; I'm not sure whether I think regulation would help or not.

It seems to me that the real problem is the very weak dollar and the United States' over-reliance on foreign oil.  I have strong feelings on whom to blame for these problems, but in the interests of respecting the TUG rule limiting  political debate, I'll refrain from posting specifics here.


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## dougp26364 (Apr 6, 2008)

JudyS said:


> Well, I guess I should be glad that I never booked that December week in Hawaii that I was eyeing a week or so ago.  Who knows what it will cost to get there now, with two Hawaiian carriers going belly up?



I plan on booking an exchange into Hawaii next year and have been watching prices. So far they've remained stable. I'm hoping they'll remain that way for another couple of weeks so I can book my exchange and then book my flights.


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## KauaiLover (Apr 6, 2008)

*West Coast to HAWAII Air Fares are out of sight*

Yikes!!  Anyone try to book a flight to Hawaii this week?
Even Hotwire and Priceline.com are over $700 RT to Kauai now.
I hope this is just a temporary spike in prices.
Anyone find a good air fare to Kauai in the middle of May 2008?


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## dboy1 (Apr 8, 2008)

You should try nliving in Alberta--Edmonton to Honolulu is about $1000 and Kauai is about $1200-$1400. And that is normal!!


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## drguy (Apr 9, 2008)

I read today that Mesa and Frontier may be going under soon due to their regional traffic.


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## JeffW (Apr 9, 2008)

One has to ask, "What would be the impact if airline ___ went under?"  Right now, it's tough to see how any of the big 7: American, Continental, Delta, Northwest, Southwest, United, USairways - would shutdown overnight like Aloha and ATA did.  I'm not sure I see Atlanta without Delta, Houston without Continental, and so on.  Those airlines are so large, it's difficult not to imagine that the gov't (whether state or federal) wouldn't get involved some way to help them out.  I'm not necessarily talking a bailout, but at least something (could be something as 'simple' as approving a merger').  

Plus, all those airlines have both national and international (except for Southwest) routes.  Even though many are cutting back on domestic capacity, they are increasing int'l capacity, as apparently there's still money to be made there.  

Someone mentioned JetBlue.  I'd put them in the 'watch' category.  I'll admit I don't know that much about them, but I doubt their shutdown would cause  national travel issues, like say an AA or United shutdown would cause.  

Jeff


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## dougp26364 (Apr 9, 2008)

JeffW said:


> One has to ask, "What would be the impact if airline ___ went under?"  Right now, it's tough to see how any of the big 7: American, Continental, Delta, Northwest, Southwest, United, USairways - would shutdown overnight like Aloha and ATA did......  Jeff



As with many other big carriers that have gone wheels up, most recently TWA, another carrier would likely come in and buy their assests and try to keep their old customers. 

We were in NOLA when TWA made it's announcement. It wasn't long before AA announced they were buying TWA's assests and, within a few years you didn't see the TWA brand anymore. We didn't feel even a slight bump of turbulence when this happened.

What would be interesting would be if one failed and no one else was in a position to buy out the assests, leaving thousands stranded and even more with useless tickets. In that case there would have to be government interference as any carrier that even looked a little pale would have difficulty selling tickets due to the passenger fear factor of being left holding worthless tickets.

As it is now, without mandatory bailout for customers, smaller LLC's are going to have more trouble getting started and staying in the air. I don't know about the rest of you but, if there's a chance my tickets may be worthless I'm not going to book on any airline that looks even remotely weeker than the others. The reports I've read indicate that both Airtran and Frontier are on unsure financial footing. This will make me think long and hard about booking any tickets with them as I'll feel the need to pay the added expense of travel insurance and, even then it would be a hassle to book another flight, then try to get reimbursement for my added expenses. It will be easier to just book on the stronger airline and not worry.


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