State of the Airlines

Thursday, February 24, 2005

NEWS: Bankruptcy's Looming Spectre

Fresh from the AP wire come warnings of impending doom for the airline industry. Standard & Poor's credit rating agency warns of the possibility of multiple new bankruptcies based on increasing pressures on the industry. This pressure takes the form of higher fuel prices, excess capacity and increased low fare competition. There is even a feeling that we could see a domino effect with several airlines moving into bankruptcy in an attempt to lighten the load (especially pension obligations) and compete on a more even playing field with the newer low cost carriers. Read More! = Rant if you dare.

I've said it before, the bankruptcy system is broken. The majors not in bankruptcy can't help but notice the concessions being made to those airlines in bankruptcy. The tone of article indicates that airlines may enter bankruptcy simply to help them shed obligations because thats what everyone else is doing. This is skewing the competition in the market.

Its also aiding and abetting the over capacity problem in the industry. As an airline I would be looking for merger opportunities if only to try and simply kill of the competition that way.

Its time to force US Airways and United Airlines back out into the cruel world to see if they survive. They have been protected for too long and have no better vital signs now that a year ago. Let the market and their creditors decide. Losing them will not cure the industry but the decrease in couldn't hurt.