Lower Fuel Prices, Cutbacks Expected To Lead To 2009 Profits

All the measures taken by the US domestic airlines to cope with the fuel crisis have had an unexpected benefit. Industry observers now say now that oil has fallen in half since its summer peak, the airlines are well-situated to withstand a drop in demand due to the slumping economy.

The Financial Times reports the biggest US airlines stand to return to profitability next year, just a few weeks after even legacy carriers such as American Airlines and United Airlines were on a deathwatch.

The paper notes corporate and consumer confidence has plummeted, but industry execs say they're prepared for the worst. In particular, Northwest Airlines says the worst economic slowdowns on record have cut revenue by no more than 1.2 per cent.

Some investment analysts are actually coming out bullish on the industry. Ray Neidl, an analyst at Calyon, has raised his rating on seven major US airlines to "add" status.

"...They have put themselves in a good position to come through the economic downturn without bankruptcies and then be able to take advantage of the recovery, most likely in the spring," Neidl said.

Doug Parker -- CEO of US Airways, another carrier some had written off for dead earlier this year -- says he's also confident. "We've got ourselves well-positioned to navigate through this," he said. "The run-up in oil forced the industry to restructure around a much different world."

Michael Levine is a former airline exec who now teaches at New York University’s School of Law. He cautions against any assumptions that fuel prices will remain low. Other industry observers say airlines competing against the combined Delta and Northwest could struggle, and that some carriers still need to raise cash.

May you live in interesting times...

FMI: www.usairways.com, www.southwest.com