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US And DL 2005 Chapter 11?

Mon Aug 23, 2004 12:47 am

I've read about them filing for Chapter 11.

What's the sentiment in this forum regarding this and... do you think it'll happen?
America West Airlines. 1983-2005. The Journey Continues...
Posts: 101
Joined: Thu Jan 01, 2004 12:15 pm

RE: US And DL 2005 Chapter 11?

Mon Aug 23, 2004 1:49 am

US will at least go to Chapter 11.....possibly Chapter 7 if you ask me. DL will go to Chapter 11 if they can't get concessions from the pilots.
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RE: US And DL 2005 Chapter 11?

Mon Aug 23, 2004 2:14 am

There are some out there who think these won't be 2005 events, but 2004 events...

US management has already stated that they have to reduce their costs by another $800M or else they'll file Chapter 11 again. That issue aside, US made something like $34M in their 2nd quarter, and presumably they will also be profitable in the 3rd quarter (JUL, AUG, SEP). Since traffic drops after Labor Day in early September (here in the USA), a weak SEP for US could theoretically negate (partially) some of their JUL/AUG results. Of course, the 4th and 1st quarter results cover the winter months here, and it's tougher to make a buck given the lower loads/revenue (everyone back at work/in school) and the higher costs (lots more diversions in the winter due to snow/fog/ice, etc.)

Delta is reportedly "burning" cash at a fast rate, and that can't continue indefinitely as they wait for their efforts to reduce pilot costs to bear fruit. Ditto for their revised business plan... It's been argued that it's better to enter Chapter 11 with as much cash as you can, and as it stands now, DL is using up its cash reserves.

A big variable for both US and DL (and others as well, to varying extents) is the increasing "spread" between costs and revenues. We know that loads/revenue taper off after Labor Day, yet the cost of fuel (based upon nearly $50/bbl oil) doesn't taper off, and could (depending upon who you listen to) go even higher, thus exacerbating the "spread" between costs and revenues. To make matters worse, a true "wild card" is all this would be the prospect of another terrorist attack, as (irrespective of whether aviation is used in the same way as it was on 9/11) any attack would simultaneously and radically drop loads/revenues and increase costs. Should another attack occur, I think there would be a prompt flurry of Chapter 11 activity, by several airlines.

Will DL and/or US file? Nobody can say with any certainty, but it clearly appears that past industry and world events have "loaded and cocked the gun" making bankruptcy filings more possible than they would have been had the gun NOT been loaded and cocked. Another terrorist attack virtually guarantees that the trigger(s) get pulled....

Time will tell---hope/pray for the best....  Big grin

ALL views, opinions expressed are mine ONLY and are NOT representative of those shared by Southwest Airlines Co.

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