Fri, Mar 28, 2003
Reports Say World's Largest is About to Go Chapter 11
A Reuters
report quotes "a banking industry source" as saying about the
airline industry generally, and American Airlines specifically:
"Bookings are terrible. It's a liquidity imperative to file as soon
as possible."
The airline officially says it's trying to not join USAirways,
United and Hawaiian in the Chapter 11 Club; but no one is giving
favorable odds. Structured in essentially the same way as United,
the giant premium airline faces nearly all United's problems, plus
the problem of having to make good on its debt payments. United,
which nevertheless lost well over $300 million in the last
reporting month, is able to cut fares to induce riders, because its
creditors are on hold. US Airways recently reduced its debt burden,
too: its unsecured creditors stand to get just a couple sents on
the dollar -- the debt service is reduced.
With the
war's keeping so many travelers at home, and the September 11
aftermath still being felt (as well as an industry downturn that
predated the terror attacks), the fast recovery of old-style
premium airlines is getting long odds.
Add to American's troubles the fact that industry overcapacity
is insured by Chapter 11 filings, and it's a foregone conclusion
that American, and other airlines on the same model, will continue
to fall. After the premium, hub-and-spoke airlines are all
operating under Court supervision, the remaining airlines will be
forced to join them, or face extinction -- and the government,
through the Bankruptcy Courts, will be running the whole bloated
system.
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