Use Threats, Deadlines To Deal With Financially Troubled
The money-lending industry
is cracking down on the passenger-flying industry and the result
could be deadly for airlines already in or headed for
"There is simply no patience for the industry not to fix its own
house," said Delta CFO Michael Palumbo, whose own company flirted
with bankruptcy earlier this year. He was quoted by the New York
The sad, simple truth is, the financial industry, which
ultimately has a choke-hold on the airlines, is now willing to do
what it's seldom done in the past: let some airlines crumble into
obscurity a la Braniff and Eastern.
Sure, after 9/11 there was a lot of goodwill surrounding the
commercial airline industry. Lenders, regulators and Congress were
all sympathetic and willing to help an industry perhaps hardest hit
by Osama bin Laden's terrorist attacks. But that was then. This is
Late last month, a group of United Airlines leaseholders tried
to repossess 14 aircraft -- a move only stopped by the judge in
charge of United's bankruptcy. Indeed, Henry Hubschman, president
of GE Aviation Financial Services, has set the tone for the
industry when he told the Times, "We can flex our muscles by moving
That's just what GE did with US Airways -- took back 25
aircraft. That, however, was more of a win-win because it freed up
$140 million in much-needed capital at the twice-bankrupt carrier.
But GE also laid out a timetable, demanding US Airways meet certain
deadlines that require US Airways to exit bankruptcy by June.
For many industry leaders, it's nothing less than
heartwrenching. Take the ATA bankruptcy, for instance. Even the
deal George Mikelsons struck with low-cost-carrier AirTran has been
sidetracked by bankruptcy court provisions requiring the judge
entertain competing bids for ATA's gates and flying stock.
"What has happened to this industry is unprecedented. Nobody
thought it would be this bad for this long," Mikelsons told the
Times. If he loses control of the airline, he said, "I will feel
like I sold my child into slavery."