Fitch downgrades DL, warns of possible UA, AA, US bankruptcy filings

[NM]

From ATW Daily News:

Delta Air Lines' credit facility rating was downgraded yesterday by Fitch Ratings, which cited "the continued erosion of the airline's near-term cash flow generation" and the expectation that it will "report another year of substantially negative free cash flow in 2009 as the airline struggles to adjust capacity to a diminished level of demand."

 

[Evan]

Every AA flight i have taken in the last 10 days has been full with standbys and the F cabin has also been full with paid or entitled upgraded passengers (not op-ups as far as i can see) and sure its only a small sample but my guess they airlines are in most trouble due to the debt they already carried not so much the loads not being there now.

Its amazing how much Americans fly domestically ! seems they have the market for a lot of airlines, maybe not all of them but most of them.

Although i did note the article points to issues in the TATL flying as the reason for losses.

 

[pauly7]

Every AA flight i have taken in the last 10 days has been full with standbys and the F cabin has also been full with paid or entitled upgraded passengers (not op-ups as far as i can see) and sure its only a small sample but my guess they airlines are in most trouble due to the debt they already carried not so much the loads not being there now.

.

I guess what you don't see though are the capacity reductions that mean fewer, fuller flights and also 'operational cancellations' that amalgamate flights....

 

[straitman]

I guess what you don't see though are the capacity reductions that mean fewer, fuller flights and also 'operational cancellations' that amalgamate flights....

ie forced efficiencies that they should have been smart enough to implement in any case.

 

[NM]

I guess what you don't see though are the capacity reductions that mean fewer, fuller flights and also 'operational cancellations' that amalgamate flights....

ie forced efficiencies that they should have been smart enough to implement in any case.

And add to that the very low fares that USA passengers are paying and you have a recipe for revenue/cost problems.

 

[straitman]

And add to that the very low fares that USA passengers are paying and you have a recipe for revenue/cost problems.

... and it is not getting any better as they still scramble to cut each others, and their own, throats :!:

 

[NM]

... and it is not getting any better as they still scramble to cut each others, and their own, throats :!:

And people say that more competition is good for the industry

 

[straitman]

And people say that more competition is good for the industry

To a point it is :!:

After that it is purely destructive. :shock:

 

[dajop]

I wonder if having so many airlines coupled with the hub system is really undermining profitability. I find quite a paradigm shift for somone used to our (admittedly simple) domestic market, that you can buy fares from A to B via C quite a bit cheaper than just flying from A to C itself, especially when the B to C sector is longer than the first. So full planes doesn't necessarily mean high yields. These days that is very rare in our domestic market.

Also, surely too much competition - eg having half a dozen carriers operating small(ish) planes -undermines profitability by meaning that there a missed opportunities for economies of scale. Take New York City to Chicago - flights connecting two cities of not inconsiderable populations, you have:
UA the main carrier, flying mix of 757's, A319/20's and ERJs
AA flying predominantly MD80's (max 140 seats)
CO flying predominantly 735's (114 seats)
DL flying regional jets (capacity <100)
NW taking you there via DTW on all sorts of planes including DC9s, 757s and others.
SW and Jetblue with a small number of 733/5/7 or A320 flights.

If there were fewer airlines, they might actually fly bigger planes and get some economies of scale, and indeed have more direct flights.

 

[Evan]

Sort of like GM, number 2 car maker and yet at there peak they were selling more cars than ever but still making a loss on all of them !
It make no sense at all to run a business with a big market share and lots of sales but still make a loss on all those sales.

I guess my point was that QF say they can scrape in a profit with full planes of discount fares even if its not a big profit its something.