Despite the Bailout, Airlines Crashing

Despite the Bailout, Airlines Crashing

Phil Brennan, NewsMax.com
Tuesday Oct. 2, 2001

America's airlines are in a tailspin and heading for an economic crash despite the massive government bailout in the works.

According to the September 24 issue of Aviation Week & Space Technology no fewer than five airlines are on the "most endangered" list -- and several may go banktrupt in months.

Because their cash reserves are tissue paper thin, the magazine lists Air Tran, America West, Continental, Northwest and US Airways as possible candidates for bankruptcy.

It's "not inconceivable", that airlines handling 85-90 percent of all airline traffic "could file for bankruptcy within the next 3 to 12 months," Aviation Week reports.

Already financially troubled, US airlines took a staggering hit from the September 11 disaster.

"Where I would have argued the week before last that the industry had the financial wherewithal to survive, I can no longer make that claim," Scott C. Gibson, a senior vice president of SH&E. a New York aviation industry consulting firm told a House committee.

A quick look at the cash position of 8 of the top carriers tells the glum story. According to Aviation Week here's a rundown of the time each needs to run though all their cash on hand:

Air Tran - 15 days

Continental - 15 days

Northwest - 50 days

American West - 52 days

US Airways - 52 days

Delta -74 days

United - 81 days

Alaska - 110 days

"Bases on what we see in terms of travel, the industry will run out of cash in less than 30 days," Gibson said.

"Some airlines were barely hanging on before the attacks and are now certain to declare bankruptcy. While most would have been able to restructure under court protection, the current environment makes that unlikely."

Making the situation even grimmer, is the fact that "lenders are closing their doors to the airline industry," David Swierenga, chief economist of the Air Transport Association to Aviation Week,

Looming just ahead is a financial catastrophe for two of the strongest airlines, United and American.

It was their planes that were hijacked by the terrorists and used to destroy the World Trade Center and devastate the Pentagon. As a result they both face horrendous contingent liability judgments so massive they could quickly plunge into bankruptcy.

"Never in my wildest dreams did I envision anything this horrific," Darryl Jenkins, head of George Washington University's Aviation Institute told Aviation week.