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AirBoat
Posts: 60
Joined: Sun Jan 18, 2015 11:58 am

Re: Boeing CEO: A major US airline likely will go out of business this year,

Tue May 12, 2020 9:01 am

There is unfortunately a new factor in play.
A lot of companies who have been having their employees work from home via skype etc. plus vpn
The bosses are now thinking, why do we need these big office buildings
The next thing they are going to think is: why do we need to air travel to all these meetings when we can video conference??
This will be a massive saving for companies and a huge loss for airlines. So I reckon a good portion of the previous business travel will not come back.
As for leisure or holiday travel, there is the scare factor, and then the fact that people simply wont have money.
So with the above in mind, airline seat capacity will definitely have to reduce.
 
speedbird52
Posts: 1013
Joined: Sat Nov 26, 2016 5:30 am

Re: Boeing CEO: A major US airline likely will go out of business this year,

Tue May 12, 2020 9:49 am

LJ wrote:
speedbird52 wrote:
What competition? There is no competition besides UA and DL. Consolidation is always a bad thing for consumers.


Having an unhealthy business is bad for all taxpayers. Yields have to go up and a liquidation of an airline makes it healthier for the remaining airlines. Moreover, with much lower entry barriers than in the past, excess profits will .probably mean new entrants

When is the last time a new long haul airline was created? Who is going to fill AAs hole? Baltia?
 
F9Animal
Posts: 4411
Joined: Thu Dec 16, 2004 7:13 am

Re: Boeing CEO: A major US airline likely will go out of business this year,

Tue May 12, 2020 9:50 am

NWAROOSTER wrote:
reltney wrote:
Mmmm a major US carrier....... he should be more worried about a major aircraft manufacturer going out of business... what a flake... next....

Before David Calhoun makes statements that a "major" US airline will go out of business he better mind his own company as Boeing is in dire states. There are about 400 737 MAX aircraft that a major number may NOT be delivered to the airlines that ordered them and customers.will be needed so they do not continue being the property of Boeing. I should note that metal shavings are being found in new build 737s and 787s. Of Boeing's civilian aircraft that may find new owners there are only the 777 an 787 and about a dozen 747-8F aircraft. The four major US airlines will be permanently parking aircraft of which some may be operated until they are due major maintenance.
All four major airlines may possibly threaten Bankruptcy or file Bankruptcy to return leased aircraft or those that have high mortgages on them or reduce the monies being spent on them. The airlines may want to shed leases at airports they no longer want to operate to or reduce flights to them. Existing carriers may want employee concessions and furlough others. They also may not take any new aircraft orders until the dust has settled and they know where they stand financially. Delta MAY continue taking some of it's A220s that are on order if the price is right. IMO Alaska Airlines will do a major shrink concentrating on Alaska flights and those on the west coast going to Alaska. Also Boeing needs to find a 737/757 replacement aircraft as I think the 737MAX is seeing the end of its production. The low cost airlines are also in trouble especially if their aircraft are leased under long term leases or heavily mortgaged. Airbus may also find itself in a position of greatly reduced sales. Just because a new aircraft has a lower operating and maintenance cost it may not offset the higher cost of acquisition. Both Boeing and Airbus need to rethink how they are going to build new aircraft. :old:



Maybe just maybe David Calhoun is padding the blow ahead of time? Could he be prepping Boeing for Bankruptcy? Prepackaged a reason by turning the focus from a possible failed airline being the reason to walk to the Bankruptcy court? I'm surprised Boeing has not filed Chapter 11 yet.
I Am A Different Animal!!
 
ewt340
Posts: 1233
Joined: Tue Jul 10, 2012 7:22 pm

Re: Boeing CEO: A major US airline likely will go out of business this year,

Tue May 12, 2020 10:04 am

I say AA. They are the weakest link.

Delta employed 31% less workers compared to AA while generating 3x more profit compared to AA.
United employed 28% less workers compared to AA while generating 1.6x more profit compared to AA.
Southwest employed 54% less workers compared to AA while generating 1.8x more profit compared to AA.

I mean looking at this alone. It should be a red flag for them.
 
TomJoel
Posts: 15
Joined: Sat Jun 08, 2019 8:02 pm

Re: Boeing CEO: A major US airline likely will go out of business this year,

Tue May 12, 2020 10:29 am

Has to be AA with the amount of debt they have. At a minimum I can see AA downsizing tremendously with a focus on MIA and DFW. Might even see AA drawback at DFW in favor of MIA since DFW hasn't exactly been a crown jewel here lately. Also, I think we will finally see the long awaited demise of Envoy.
 
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oxonrow
Posts: 53
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Re: Boeing CEO: A major US airline likely will go out of business this year,

Tue May 12, 2020 11:01 am

In endless pursuit of efficiency, one is most optimal? Late stage capitalism? Bring back regulation? Given environmental concerns, not unfathomable anymore?
 
ewt340
Posts: 1233
Joined: Tue Jul 10, 2012 7:22 pm

Re: Boeing CEO: A major US airline likely will go out of business this year,

Tue May 12, 2020 11:02 am

oxonrow wrote:
In endless pursuit of efficiency, one is most optimal? Late stage capitalism? Bring back regulation? Given environmental concerns, not unfathomable anymore?


Merge the 3 airlines and then have the government run it.
 
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OzarkD9S
Posts: 5635
Joined: Tue Oct 23, 2001 2:31 am

Re: Boeing CEO: A major US airline likely will go out of business this year,

Tue May 12, 2020 11:26 am

One thing that hasn't dried up is the supply of good drugs some people are taking before they post on this thread. WOW! :hypnotized:
"True, I talk of dreams,
Which are the children of an idle brain." -Mercutio
 
tphuang
Posts: 5043
Joined: Tue Mar 14, 2017 2:04 pm

Re: Boeing CEO: A major US airline likely will go out of business this year,

Tue May 12, 2020 11:26 am

A look at the big 3, who generally are facing the biggest risk here.

AA claims that it will have burn $70 million a day in Q2, but will get it down to $50 million a day by June. And including both PSP + loans, it will have $11 billion. Given there will be minimal increase in demand in Q3 and fixed costs are just as high, they will probably be look at burning $45 million a day in Q3. And then if they downsize in Q4, maybe they get down to $30 million a day? By end of the year, that cash reserve will be down to under $4 billion. And they have very little valuable unencumbered assets outside of their ff program. It's clear at this point the market don't value some of these assets as much as the airline appraisers. I don't see how much additional liquidity they get. So what can they do aside from filing chapter 11? And then it will be a long painful path to avoid chapter 7.

UA said it had $9.6 billion at end of April. But that does not include $2.5 billion they have yet to receive from PSP or any possible loans. Let's say they are forced to take those loans due to market demand for its unencumbered assets. 9.6 + 2.5 + 4.5 = $16.6 billion. Let's say they burn approximate $40 million a day for next 2 months and then $30 to 35 million a day for Q3. That will bring them down to $11 billion by end of Q3. At this point, they will probably do massive furlough (unfortunately for the employees) to lower cash burn down to $20 million a day let's say for Q4 + Q1. they should still have $7 billion by end of 2020 Q1. If demand is back to 70% by Q2 next year, I don't think they necessarily need to file chapter 11.

DL will probably have $12 billion by end of Q2 without additional CARES loans based on the recent successful bond offerings. They are burning somewhere between AA and UA. It seems like unlikely they will need chapter 11 unless they can't be cash neutral by Q2 next year. Let's say they get $5 billion additional loans from gov't and public market, since they have more unencumbered assets. They'd have $18 billion by end of Q2. Let's say they burn $40 million a day in Q3. And with some layoffs on Oct (probably not as aggressive as UA), they get that down to $25 million a day for Q4 + Q1. They'd be down to $10 billion by end of 2020 Q1.

If we look at L shape recovery as the most likely, then AA is entering chapter 11 for sure. It's current action in trying to expand its market share seems like very risky. If we believe in recovery by Q2/3 of next year to cash neutral, both UA and DL should be fine but with mountains of debt to pay off along with much smaller fleet.

WN has plenty of cash and not in any danger.

AS/B6 have less cash, but slower cash burn and are not in any danger.

G4 apparently has a very aggressive work force rduction plan and should be fine.

F9 has adopted a NK 2.0 network plan after this and that's a disaster for NK. Hard to imagine both airlines survive this.

I could see a AS/AA merger but why would AS management wants to be part of that AA mess.

HA looks like it will be in massive trouble. I'm not sure it avoid the courts. The traffic level to HI will be low for a long time and WN is still persisting with its HI strategy.
 
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oxonrow
Posts: 53
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Re: Boeing CEO: A major US airline likely will go out of business this year,

Tue May 12, 2020 11:29 am

ewt340 wrote:
oxonrow wrote:
In endless pursuit of efficiency, one is most optimal? Late stage capitalism? Bring back regulation? Given environmental concerns, not unfathomable anymore?


Merge the 3 airlines and then have the government run it.


I'll walk, thank you. But it sure does seem to be heading in a direction we did not think possible. We might prefer regulation vs very late stage monopolies, especially if you don't sit up front but still want to maintain some level of dignity.
 
CRJ5000
Posts: 135
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Re: Boeing CEO: A major US airline likely will go out of business this year,

Tue May 12, 2020 11:36 am

I stole the following from a pilot forum... It is at least a week old, and some numbers may have already changed, but it is a pretty good collection of info for the "majors" balance sheets after Q1 earnings. Numbers for all airlines assume they take the loans that are part of the CARES act.
Dates for "Cash to 0 at current burn" are interesting to me, though obviously no one would wait until 0 before filing chapter 11. It's worth noting that the cash to 0 assumes current burn rate, which will almost certainly improve each month that goes by.
I feel more bullish on the small-mid sized carriers than I do on the legacies, though I don't think any legacy will "go out of business" entirely.

Southwest Airlines
Total Cash-15.5B
Total Debt-13B
Total Unencumbered Assets-5B
Debt to Asset Ratio-0.63
Q2 Cash Burn-30M/Day to 35M/Day
Cash To Zero at Current Burn-11/21

Delta Air Lines
Total Cash-15B
Total Debt-32B
Total Unencumbered Assets-10B
Debt to Asset Ratio-1.28
Q2 Cash Burn-100M/Day slowing to 50M/Day
Cash to Zero at Current Burn-4/21

United Airlines
Total Cash-13B
Total Debt-31.5B
Total Unencumbered Assets-12.5B
Debt to Asset Ratio-1.23
Q2 Cash Burn-40M/Day to 45M/Day
Cash to Zero at Current Burn-4/21

American Airlines
Total Cash-11B
Total Debt-46B
Total Unencumbered Assets-5B
Debt to Asset Ratio-2.875
Q2 Cash Burn-70M/Day slowing to 50M/Day
Cash to Zero at Current Burn-2/21

Alaska Airlines
Total Cash-3.25B
Total Debt-5.5B
Total Unencumbered Assets-1B
Debt to Asset Ratio-1.29
Q2 Cash Burn-8.65M/Day slowing to 6.65M/Day
Cash to Zero at Current Burn-10/21

Spirit Airlines
Total Cash-1.73B
Total Debt-3.8B
Total Unencumbered Assets-565M
Debt to Asset Ratio-1.66
Q2 Cash Burn-4M/Day
Cash to Zero at Current Burn-8/21

JetBlue Airways
Total Cash-3.65B
Total Debt-6B
Total Unencumbered Assets-1.58B
Debt to Asset Ratio-1.14
Q2 Cash Burn-18M/Day slowing to 10M/Day
Cash to Zero at Current Burn-7/21
 
MIflyer12
Posts: 7728
Joined: Mon Feb 18, 2013 11:58 pm

Re: Boeing CEO: A major US airline likely will go out of business this year,

Tue May 12, 2020 11:36 am

speedbird52 wrote:
LJ wrote:
speedbird52 wrote:
What competition? There is no competition besides UA and DL. Consolidation is always a bad thing for consumers.


Having an unhealthy business is bad for all taxpayers. Yields have to go up and a liquidation of an airline makes it healthier for the remaining airlines. Moreover, with much lower entry barriers than in the past, excess profits will .probably mean new entrants

When is the last time a new long haul airline was created? Who is going to fill AAs hole? Baltia?


You overlook (or willfully ignore?) the fact that AA is primarily a domestic airline.

From the Annual Report published Feb. '20, passenger revenues by geo:

Domestic (as U.S. carriers define domestic), $30.9 Billion
Latin America, $5.0 Billion
Atlantic, $4.6 Billion
Pacific, $1.5 Billion

There are 10 U.S. carriers with ~100 mainline planes or more, all of which are sitting on unused capacity. There are non-owned RJ carriers used by AA that don't need to sink with AA. There are lots of AA international partners that will still want to fly to the U.S. even without AA: Qantas, JAL, CX, BA...

AA could sink tomorrow and be little missed by the flying public. It would take a few months to shuffle capacity where AA is big in O&D (DFW, MIA, LAX, NY shuttle), but, for example, customers now connecting in PHX could readily connect in DEN, LAS, or SLC. It's probably less disruptive to let a big carrier sink than force 20-25% capacity reductions across all carriers by inverse seniority layoff.
 
tphuang
Posts: 5043
Joined: Tue Mar 14, 2017 2:04 pm

Re: Boeing CEO: A major US airline likely will go out of business this year,

Tue May 12, 2020 11:49 am

CRJ5000 wrote:
I stole the following from a pilot forum... It is at least a week old, and some numbers may have already changed, but it is a pretty good collection of info for the "majors" balance sheets after Q1 earnings. Numbers for all airlines assume they take the loans that are part of the CARES act.
Dates for "Cash to 0 at current burn" are interesting to me, though obviously no one would wait until 0 before filing chapter 11. It's worth noting that the cash to 0 assumes current burn rate, which will almost certainly improve each month that goes by.
I feel more bullish on the small-mid sized carriers than I do on the legacies, though I don't think any legacy will "go out of business" entirely.

Southwest Airlines
Total Cash-15.5B
Total Debt-13B
Total Unencumbered Assets-5B
Debt to Asset Ratio-0.63
Q2 Cash Burn-30M/Day to 35M/Day
Cash To Zero at Current Burn-11/21

Delta Air Lines
Total Cash-15B
Total Debt-32B
Total Unencumbered Assets-10B
Debt to Asset Ratio-1.28
Q2 Cash Burn-100M/Day slowing to 50M/Day
Cash to Zero at Current Burn-4/21

United Airlines
Total Cash-13B
Total Debt-31.5B
Total Unencumbered Assets-12.5B
Debt to Asset Ratio-1.23
Q2 Cash Burn-40M/Day to 45M/Day
Cash to Zero at Current Burn-4/21

American Airlines
Total Cash-11B
Total Debt-46B
Total Unencumbered Assets-5B
Debt to Asset Ratio-2.875
Q2 Cash Burn-70M/Day slowing to 50M/Day
Cash to Zero at Current Burn-2/21

Alaska Airlines
Total Cash-3.25B
Total Debt-5.5B
Total Unencumbered Assets-1B
Debt to Asset Ratio-1.29
Q2 Cash Burn-8.65M/Day slowing to 6.65M/Day
Cash to Zero at Current Burn-10/21

Spirit Airlines
Total Cash-1.73B
Total Debt-3.8B
Total Unencumbered Assets-565M
Debt to Asset Ratio-1.66
Q2 Cash Burn-4M/Day
Cash to Zero at Current Burn-8/21

JetBlue Airways
Total Cash-3.65B
Total Debt-6B
Total Unencumbered Assets-1.58B
Debt to Asset Ratio-1.14
Q2 Cash Burn-18M/Day slowing to 10M/Day
Cash to Zero at Current Burn-7/21

I think a lot of the total cash/debt/unencumbered assets is not accurate.
 
twaconnie
Posts: 262
Joined: Sat Jun 28, 2008 3:18 pm

Re: Boeing CEO: A major US airline likely will go out of business this year,

Tue May 12, 2020 12:00 pm

Nicknuzzii wrote:
Serious question. Is this thread a joke? AA is not going anywhere anytime soon.

I agree and in the worst case scenario I would hope AA could get a government loan guarantee like the auto industry did years ago.
 
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SEPilot
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Re: Boeing CEO: A major US airline likely will go out of business this year,

Tue May 12, 2020 12:14 pm

The fact that the airline business is one of the very riskiest businesses out there, with absolutely staggering capital requirements, enormous labor and fuel costs, intense competition, slim profit margins, and very capricious demand makes it extremely likely that one or more may be unable to weather this totally unexpected cratering of demand for an extended period. To me it is amazing that they have all survived so far. No business expects such a disastrous event as has hit the airline industry as a whole.
The problem with making things foolproof is that fools are so doggone ingenious...Dan Keebler
 
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SEPilot
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Joined: Sat Dec 30, 2006 10:21 pm

Re: Boeing CEO: A major US airline likely will go out of business this year,

Tue May 12, 2020 12:20 pm

ewt340 wrote:
oxonrow wrote:
In endless pursuit of efficiency, one is most optimal? Late stage capitalism? Bring back regulation? Given environmental concerns, not unfathomable anymore?


Merge the 3 airlines and then have the government run it.

A guarantee of disaster. Government is fundamentally incapable of efficiency; name one thing ANY government runs well. And the ONLY force that leads to efficiency is competition.
The problem with making things foolproof is that fools are so doggone ingenious...Dan Keebler
 
CRJ5000
Posts: 135
Joined: Thu Jan 17, 2019 3:06 pm

Re: Boeing CEO: A major US airline likely will go out of business this year,

Tue May 12, 2020 12:22 pm

tphuang wrote:
I think a lot of the total cash/debt/unencumbered assets is not accurate.


From what I checked against Q1 earnings, it seemed fairly accurate, though I don't doubt there are some different ways of interpreting data, and things are changing rather quickly.
It still doesn't paint the whole picture, as it assumes a worst case scenario by keeping current burn rates, which will certainly improve. It's still anyone's guess how, when, and to what extent recovery happens.
 
tphuang
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Joined: Tue Mar 14, 2017 2:04 pm

Re: Boeing CEO: A major US airline likely will go out of business this year,

Tue May 12, 2020 12:27 pm

CRJ5000 wrote:
tphuang wrote:
I think a lot of the total cash/debt/unencumbered assets is not accurate.


From what I checked against Q1 earnings, it seemed fairly accurate, though I don't doubt there are some different ways of interpreting data, and things are changing rather quickly.
It still doesn't paint the whole picture, as it assumes a worst case scenario by keeping current burn rates, which will certainly improve. It's still anyone's guess how, when, and to what extent recovery happens.

the original post was these numbers are what the airlines will have at end of Q2. And a lot of these figures like DL's cash position are just complete guesses by the poster based on how much additional loans he thinks they will get in Q2. DL has publicly state it will have about $10 billion in cash at end of Q2 and later it ended up rasiging $2 billion more in debt market than it was seeeking, so it will have $12 billion at end of Q2.
 
Exeiowa
Posts: 326
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Re: Boeing CEO: A major US airline likely will go out of business this year,

Tue May 12, 2020 12:31 pm

I can tell you working in private industry is not as efficient as "the market" would let you believe. I know of armies of peoples existance is only to provide additional non useful work for others. Lets say they leaned production but never management.
 
IWMBH
Posts: 612
Joined: Tue Apr 17, 2018 5:01 pm

Re: Boeing CEO: A major US airline likely will go out of business this year,

Tue May 12, 2020 12:46 pm

Why would the CEO of Boeing such an argument? Seems just stupid to say this about your (potential) customers.
I hope none of the US3 will fail, an duopoly in such a large market is never a good idea.
 
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NWAESC
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Re: Boeing CEO: A major US airline likely will go out of business this year,

Tue May 12, 2020 12:49 pm

tphuang wrote:
DL will probably have $12 billion by end of Q2 without additional CARES loans based on the recent successful bond offerings. They are burning somewhere between AA and UA. It seems like unlikely they will need chapter 11 unless they can't be cash neutral by Q2 next year. Let's say they get $5 billion additional loans from gov't and public market, since they have more unencumbered assets. They'd have $18 billion by end of Q2. Let's say they burn $40 million a day in Q3. And with some layoffs on Oct (probably not as aggressive as UA), they get that down to $25 million a day for Q4 + Q1. They'd be down to $10 billion by end of 2020 Q1.


DL is already offering voluntary leaves of up to 1 year. I can easily see an 18 or even 24 month offering coming soon. Those coupled with a solid Early Out offer should (?) mitigate layoffs somewhat.
"Nothing ever happens here, " I said. "I just wait."
 
JAMBOJET
Posts: 279
Joined: Tue Dec 11, 2018 6:23 pm

Re: Boeing CEO: A major US airline likely will go out of business this year,

Tue May 12, 2020 12:54 pm

MIflyer12 wrote:
speedbird52 wrote:
LJ wrote:

Having an unhealthy business is bad for all taxpayers. Yields have to go up and a liquidation of an airline makes it healthier for the remaining airlines. Moreover, with much lower entry barriers than in the past, excess profits will .probably mean new entrants

When is the last time a new long haul airline was created? Who is going to fill AAs hole? Baltia?


You overlook (or willfully ignore?) the fact that AA is primarily a domestic airline.

From the Annual Report published Feb. '20, passenger revenues by geo:

Domestic (as U.S. carriers define domestic), $30.9 Billion
Latin America, $5.0 Billion
Atlantic, $4.6 Billion
Pacific, $1.5 Billion



Delta is just as domestic as AA:
DL Domestic Revenues: 71.8%
AA Domestic Revenues: 73.6%
Even the most international of US Airlines, United, is still majority Domestic: 62.3%

Speedbird52 was clearly talking about the big three airlines which are the only "long haul" carriers in the US in the sense that no other major US carrier has planes that can fly to Australia, deep South America (at present before someone starts on the XLR), interior Europe, or Pacific.
 
Ziyulu
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Re: Boeing CEO: A major US airline likely will go out of business this year,

Tue May 12, 2020 1:06 pm

I vote for United.
 
jayunited
Posts: 2762
Joined: Sat Jan 05, 2013 12:03 am

Re: Boeing CEO: A major US airline likely will go out of business this year,

Tue May 12, 2020 1:09 pm

32andBelow wrote:
Why would contracting airlines merge. Who needs MORE plane rn?


I'm not sure a merger would necessarily equal more planes. Take for instance this is just an example UA we have a lot of narrow-bodies that are 20+ years of age. Now take for instance JetBlue this narrow-body fleet is much younger. If a merger were to occur UA could retire the entire 752 PW and RR fleet, we could also retire some of our oldest (not the entire fleet of) A320s, 738s, 739s, and 739ERs. UA could also then defer most of our MAX order for at least 4-5 years which is when the industry should be back to growing. It is going to take 2-3 years to get back to pre-COVID-19 levels but actual growth is a good 4-5 years down the road.

So when I brought up the idea of consolidation this is what I was referring to not putting more planes into the sky.
 
Miamiairport
Posts: 575
Joined: Tue Apr 10, 2018 8:14 pm

Re: Boeing CEO: A major US airline likely will go out of business this year,

Tue May 12, 2020 1:10 pm

I could see AA entering Chapter 11 before year end. Whether the DOJ would allow a merger within the big 4 is the question as AA could go looking for a partner. I don't see any of the big 4-6 going out of business. I do see massive layoffs and I think they are going to happen before 10/1. Airlines will find a way or get a waiver to CARES if it threatens their existence.

The ULCC another big question. I've been flying a lot on AA and the back of the plane is definitely filling up albeit there's also been massive capacity cuts. Moreover, are these new bookings or bookings from months ago and people decided to travel anyway? Conventional wisdom would say that with 25% unemployment, or worse, few are going to be going on any kind of vacation that involves a material outlay of money. The $59 fare is often just a small part when you consider lodging, transportation, food, events, etc. Add in social distancing and wearing a mask and going to see Mickey becomes a real PITA. My hunch is that we will either see mergers in the ULCC space or one or more going out of business.
 
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Web500sjc
Posts: 855
Joined: Tue Sep 15, 2009 4:23 am

Re: Boeing CEO: A major US airline likely will go out of business this year,

Tue May 12, 2020 1:27 pm

The CEO of Boeing was asked by the News anchor

“The money that the government used to bail out the airlines ends in September. So they are going to have to start laying off people. Do you expect the airlines to be able to survive this, do you think there may be a major US carrier that has to go out of business?”

CEO-“ Well I don’t want to be too predictive on that subject, but yes, something will happen when September comes around. Traffic levels will not be back to 100%, they won’t even be to 25. Maybe by the end of the year we’re at 50. So there will defiantly be adjustments that have to be made on the part of the airlines.”

IWMBH wrote:
Why would the CEO of Boeing such an argument? Seems just stupid to say this about your (potential) customers.
I hope none of the US3 will fail, an duopoly in such a large market is never a good idea.


The CEO didn’t say “I think an airline will fail”, he more said “I think there will be adjustments.” The news services just reported that he answered a question where “will a major airline go out of business” with a yes. That being said, it is very clear that the CEO thinks there will be adjustments (probably large, possibly CH11) to the domestic airline market.
Boiler Up!
 
CRJ5000
Posts: 135
Joined: Thu Jan 17, 2019 3:06 pm

Re: Boeing CEO: A major US airline likely will go out of business this year,

Tue May 12, 2020 1:37 pm

Large companies keep extending their work from home policies until the end of the year. Places like Facebook and Microsoft have cancelled large meetings involving travel until summer of 2021 already. Essentially every single conference has been cancelled for 2020. No company wants the possible liability and backlash of sending their employees on a business trip.
Meanwhile, beaches in Florida have to be shut down after opening because they are too crowded. Parks are overflowing. People line up for hours at boat launches. Disney Shanghai sold out for the week in minutes. VFR/leisure travelers will be back quickly. Not to 2019 levels, but they will fill more seats until at least early 2021 than higher yielding business travel. The younger generations are not nearly as scared of this as older generations.
The airlines that can cater to that crowd are going to withstand this longer and fare better. It will be tough for any airline with a high CASM to compete for that market. I definitely foresee at least 1 legacy filing chapter 11, and at that point it will be hard for the others to not follow because of the cost advantage gained.
I imagine some consolidation is likely in the industry, but can't imagine 2 legacy airlines being able to merge successfully.
My bet on first to chapter 11 is AA.
 
Clipper1975
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Joined: Fri Dec 20, 2019 5:48 pm

Re: Boeing CEO: A major US airline likely will go out of business this year,

Tue May 12, 2020 1:42 pm

airlinewatcher1 wrote:
It makes me wonder what would become of DFW, CLT, DCA, and MIA in the event of AA going out of business. It seems unlikely, but I never say never nowadays. No airline is safe. Demand isn't coming back anytime soon.


Exactly ! Who could ever imagine one day Pan Am would close the doors ? Never say never. Everything is possible, specially nowadays.
 
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Revelation
Posts: 23891
Joined: Wed Feb 09, 2005 9:37 pm

Re: Boeing CEO: A major US airline likely will go out of business this year,

Tue May 12, 2020 1:49 pm

phxa340 wrote:
I mean, he can’t just come out and say AA is so far up to its eyes in debt that they will be out of business by the end of the year ... he’s gotta keep it in generalities.

Jon O tweeted:

There’s a collective thought bubble over the heads of leaders in this industry and with few exceptions they all read the same airline.

Ref: https://twitter.com/jonostrower/status/ ... 9092154374

I think you're right.

whywhytee wrote:
I just cannot imagine AA going out of business entirely.

Lots of people said that about TW, PA, etc.

n9801f wrote:
Pretty sure that a 2020 airline bankruptcy would be unlike previous cases for two reasons.

First, bankruptcy laws were changed around 2005. (Maybe knowledgeable others can comment on this aspect?)

Second, DIP (Debtor-in-Possession) financing may be unavailable now. This was the "usual" way of getting working capital needed to run the airline while it was in Chapter 11.

AA avoided the need of a DIP loan in 2014 by filing while it had lots of cash on hand.

Bottom Line: In today's environment, I'm having a hard time imagining why banks would be incentivized to fund Chapter 11 when revenues and collateral values are low. And because capacity is so far above demand, creditors will have weak prospects of a reorganized company paying them back in the future and might want to liquidate now instead.

So a 2020 airline bankruptcy seems more likely to lead to a liquidation than previous ones.

Calhoun's comments seem to make good sense to me.

I agree with all you wrote, especially the parts you bolded.

Bankruptcy laws were changed, and a few airlines went into bankruptcy to beat the deadline so they could "enjoy" the protections of the old laws. It kind of became a cycle where one airline went into BK and this meant others needed to do the same if they wanted to compete. This also triggered the mergers that reduced the US6 to the US3. As above, the problem today is you can't go into BK assuming you will come out. Also I doubt the DoJ wants to see much more consolidation of the industry, unlike 2005. DoJ could insist on divestitures that would make a potential merger crumble.

The debt numbers just posted by CRJ5000 show why AA is at most risk. If they were to go into CH11 I doubt DoJ would want to see DL or UA swallow them whole nor would either of them have the assets to buy AA, so the most likely outcome would be liquidation.

Web500sjc wrote:
The CEO didn’t say “I think an airline will fail”, he more said “I think there will be adjustments.” The news services just reported that he answered a question where “will a major airline go out of business” with a yes. That being said, it is very clear that the CEO thinks there will be adjustments (probably large, possibly CH11) to the domestic airline market.

Calhoun simply isn't very good at his job. He has already misspoken several times. All he needed to do is avoid saying "yes". He could have just said "there will be adjustments" without saying "yes" and he would have been fine. You may think this is being picky, but a big part of the CEO's job is to communicate accurately. Lord knows they get paid like they are superstars, we should expect they be damn good given what they are paid. Boeing really needs to find younger stronger more talented people for its BoD and C-Suite.
Last edited by Revelation on Tue May 12, 2020 1:51 pm, edited 1 time in total.
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kiowa
Posts: 731
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Re: Boeing CEO: A major US airline likely will go out of business this year,

Tue May 12, 2020 1:53 pm

Boeing itself would seem the most exposed to the current environment. I doubt very much the US government would let them close up shop though.
 
onwFan
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Re: Boeing CEO: A major US airline likely will go out of business this year,

Tue May 12, 2020 2:00 pm

If there has ever been an even bigger joke of a thread, can someone please link here?
 
speedbird52
Posts: 1013
Joined: Sat Nov 26, 2016 5:30 am

Re: Boeing CEO: A major US airline likely will go out of business this year,

Tue May 12, 2020 2:02 pm

JAMBOJET wrote:
MIflyer12 wrote:
speedbird52 wrote:
When is the last time a new long haul airline was created? Who is going to fill AAs hole? Baltia?


You overlook (or willfully ignore?) the fact that AA is primarily a domestic airline.

From the Annual Report published Feb. '20, passenger revenues by geo:

Domestic (as U.S. carriers define domestic), $30.9 Billion
Latin America, $5.0 Billion
Atlantic, $4.6 Billion
Pacific, $1.5 Billion



Delta is just as domestic as AA:
DL Domestic Revenues: 71.8%
AA Domestic Revenues: 73.6%
Even the most international of US Airlines, United, is still majority Domestic: 62.3%

Speedbird52 was clearly talking about the big three airlines which are the only "long haul" carriers in the US in the sense that no other major US carrier has planes that can fly to Australia, deep South America (at present before someone starts on the XLR), interior Europe, or Pacific.

Yup.
 
tphuang
Posts: 5043
Joined: Tue Mar 14, 2017 2:04 pm

Re: Boeing CEO: A major US airline likely will go out of business this year,

Tue May 12, 2020 2:07 pm

Revelation wrote:
phxa340 wrote:
I mean, he can’t just come out and say AA is so far up to its eyes in debt that they will be out of business by the end of the year ... he’s gotta keep it in generalities.

Jon O tweeted:

There’s a collective thought bubble over the heads of leaders in this industry and with few exceptions they all read the same airline.

Ref: https://twitter.com/jonostrower/status/ ... 9092154374

I think you're right.

whywhytee wrote:
I just cannot imagine AA going out of business entirely.

Lots of people said that about TW, PA, etc.

n9801f wrote:
Pretty sure that a 2020 airline bankruptcy would be unlike previous cases for two reasons.

First, bankruptcy laws were changed around 2005. (Maybe knowledgeable others can comment on this aspect?)

Second, DIP (Debtor-in-Possession) financing may be unavailable now. This was the "usual" way of getting working capital needed to run the airline while it was in Chapter 11.

AA avoided the need of a DIP loan in 2014 by filing while it had lots of cash on hand.

Bottom Line: In today's environment, I'm having a hard time imagining why banks would be incentivized to fund Chapter 11 when revenues and collateral values are low. And because capacity is so far above demand, creditors will have weak prospects of a reorganized company paying them back in the future and might want to liquidate now instead.

So a 2020 airline bankruptcy seems more likely to lead to a liquidation than previous ones.

Calhoun's comments seem to make good sense to me.

I agree with all you wrote, especially the parts you bolded.

Bankruptcy laws were changed, and a few airlines went into bankruptcy to beat the deadline so they could "enjoy" the protections of the old laws. It kind of became a cycle where one airline went into BK and this meant others needed to do the same if they wanted to compete. This also triggered the mergers that reduced the US6 to the US3. As above, the problem today is you can't go into BK assuming you will come out. Also I doubt the DoJ wants to see much more consolidation of the industry, unlike 2005. DoJ could insist on divestitures that would make a potential merger crumble.

The debt numbers just posted by CRJ5000 show why AA is at most risk. If they were to go into CH11 I doubt DoJ would want to see DL or UA swallow them whole nor would either of them have the assets to buy AA, so the most likely outcome would be liquidation.

Web500sjc wrote:
The CEO didn’t say “I think an airline will fail”, he more said “I think there will be adjustments.” The news services just reported that he answered a question where “will a major airline go out of business” with a yes. That being said, it is very clear that the CEO thinks there will be adjustments (probably large, possibly CH11) to the domestic airline market.

Calhoun simply isn't very good at his job. He has already misspoken several times. All he needed to do is avoid saying "yes". He could have just said "there will be adjustments" without saying "yes" and he would have been fine. You may think this is being picky, but a big part of the CEO's job is to communicate accurately. Lord knows they get paid like they are superstars, we should expect they be damn good given what they are paid. Boeing really needs to find younger stronger more talented people for its BoD and C-Suite.


I agree with what you are saying here. Calhoun's comment probably didn't go too well with people in charge of AA.

Also on AA, I think at this point, they will have to file chapter 11 while they still have plenty of money left. They badly need to lower some of their fixed costs, which probably can only happen cleanly through the courts. Some of the debt they are carrying need to get restructures. There will need to be a dramatic cut to their fleet and employee count. Not sure what happens to their ff program.
 
hohd
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Re: Boeing CEO: A major US airline likely will go out of business this year,

Tue May 12, 2020 2:07 pm

If there are mergers, JetBlue/Alaska would make sense, very little overlap and they can cut some costs. Frontier/Allegiant or Spirit is another possibility. AA will have its work cut out, but it will be around, they may have to cut back from ORD and/or LAX, but DFW, MIA, CLT and PHL are strong hubs for them, they will retain. Look for AA to make even more deals with carriers around the world, the QR and AA deal will get stronger in the future.
 
richierich
Moderator
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Re: Boeing CEO: A major US airline likely will go out of business this year,

Tue May 12, 2020 2:08 pm

onwFan wrote:
If there has ever been an even bigger joke of a thread, can someone please link here?


I don't think the prospect of a major US airline going out of business is a joke. This wasn't just suggested by a random person on the street talking to Jimmy Kimmel, this was the CEO of one of the biggest companies in the world, a company that just happens to supply aircraft to many of the largest carriers on the planet. It's all speculative but the prospects of Ch. 11 or a major contraction of size or complete shutdown of a well-known airline in this country is entirely possible, sadly.

I will ask this question though: are the big four US airlines 'too big to fail' at this point? Two decades ago, there were seven or eight major airlines in this country, but mergers have basically cut that number in half. Three of those airlines offer flights all over the world, bringing trade and money into the US economy; without one of them, there would be a major hole that would take years, if not a decade, to fill.
What are the chances that the CARES act gets extended another 6 months? I know the government can't prop up every industry indefinitely, and there is perhaps a reluctance to do that going forward, but how would that change this narrative?

Need I point out that a lot of jobs could be at stake here. {It is also an election year...}
None shall pass!!!!
 
chonetsao
Posts: 587
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Re: Boeing CEO: A major US airline likely will go out of business this year,

Tue May 12, 2020 2:26 pm

Everyone think AA is the candidate. But I don't think so. Guess who has the most unsecured assets that is easily slip beneath the radar?

There is one US airlines own stakes in Virgin Atlantic, Korean Air, Aeromexico, LATAM, AF/KL and an oil refinery company (I think China Eastern as well?). That is a lot of money tied to several struggling companies around the world. What damage those other airlines will bring to the parent holding company in the US? How much more money this US airline needs to sink to maintain its investment? And how much loss it can take from the oil refinery while the oil price is below USD$30?

Sometimes the most obvious answer might not be the true answer. When the oil price was high, AA did not hedge and it saved its day when oil price collapse. Maybe in 2020, it is airline that does not have too many investment tied to other airlines and other activities would save itself.
 
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aemoreira1981
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Re: Boeing CEO: A major US airline likely will go out of business this year,

Tue May 12, 2020 2:38 pm

winginit wrote:
Opus99 wrote:
phxa340 wrote:
I mean, he can’t just come out and say AA is so far up to its eyes in debt that they will be out of business by the end of the year ... he’s gotta keep it in generalities.

I thought it would be AA. I wasn’t sure for a while


You know I never thought we'd see another carving of the cooked pig like we did with Pan Am but here we are. Let's see here...

- United bring your plate right over here we're going to give you the rest of ORD, yes congratulations on your new fortress hub
- Delta there you go step right up here's your significant slice of LAX get it while it's hot and here's some JFK to top you off
- Southwest here you go son you enjoy that steaming slice of Phoenix heat


With JFK, I don't see DL getting nearly all of it. B6 will want a significant cut of short-haul slots and entry into LHR and CDG at least (DL would have a virtual monopoly on JFK-LHR).

The big question becomes: who can then capitalize in DFW and MIA, and do PHL and CLT, less than 300 miles away from Delta hubs at JFK and ATL, collapse? In terms of fleeting, who would want the Dreamliner fleet? (United might want to get its hands on the B77W fleet, but most of the B772s would likely be done.) The short-haul fleet is where there would really be a glut issue, as AA is the world's largest A321 operator.

hohd wrote:
If there are mergers, JetBlue/Alaska would make sense, very little overlap and they can cut some costs. Frontier/Allegiant or Spirit is another possibility. AA will have its work cut out, but it will be around, they may have to cut back from ORD and/or LAX, but DFW, MIA, CLT and PHL are strong hubs for them, they will retain. Look for AA to make even more deals with carriers around the world, the QR and AA deal will get stronger in the future.


There would be mostly a coastal network, but their fleet development is divergent---AS desires Boeing and the A21N, while B6 is trending all Airbus. Also, B6 is more akin to a European model. Also, you would have a huge gap in middle America. DFW is going to be the real prize if AA goes kaput. But if that were to happen, would long-haul out of DFW mostly disappear as well? Candidate airlines would likely only be interested in short-haul, especially DL (preferring instead to funnel TATL and LatAm through ATL, TATL through JFK, and build up SEA even more), and UA...desiring TPAC through SFO, LatAm through IAH (just 5 hours away by car) and TATL through EWR and IAD. Intriguing, and not totally out there in a carve-up, would be if WN decided it had interest in DFW slots.
 
hohd
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Re: Boeing CEO: A major US airline likely will go out of business this year,

Tue May 12, 2020 3:01 pm

SEPilot wrote:
ewt340 wrote:
oxonrow wrote:
In endless pursuit of efficiency, one is most optimal? Late stage capitalism? Bring back regulation? Given environmental concerns, not unfathomable anymore?


Merge the 3 airlines and then have the government run it.

A guarantee of disaster. Government is fundamentally incapable of efficiency; name one thing ANY government runs well. And the ONLY force that leads to efficiency is competition.


I am in the private sector, and I can say that government agencies are more efficient with finances and they watch their spending more carefully than the private sector. The bureaucracy at many larger corporations are worse than most govt agencies.
 
LAXdude1023
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Re: Boeing CEO: A major US airline likely will go out of business this year,

Tue May 12, 2020 3:08 pm

Lets be real here: UA, AA, WN, and DL are NOT going out of business. No way. No how.

The dip in passengers is TEMPORARY. It might last for another year to 18 months but it will return to sustainable levels. The government will not let a company of that size go under for a temporary situation. We may not get to 2019 levels, but we will get most of the way there once again.

To determine who might be most at risk, you have to look at how flying might change as a result of this virus.

-There will be a greater emphasis on sanitation. That will keep aircraft from doing quick turn arounds.
-There is a possibility that there will have to be fewer seats on the aircraft
-Focus cities will be fewer and further between. Airlines will retrench into the hub and spoke model more firmly.
-Hubs will probably become specialized even moreso than now into specific functions like: domestic, Latin, Asia, and European instead of the jack of all trades model. DFW and ATL may be the only exceptions here.
-Airfares will most certainly rise in the long time to cover fewer passengers per plane carried.

Based on that, if airlines are at risk, it will not be AA, UA, DL, and WN. Instead, if airlines are at risk, it will be the low cost and ultra low cost carriers that depend on being able to cram as many seats onto a plane as possible and turning around planes as quickly as possible. They will be the most hindered by possible future changes in flying.
FOR THE LOVE OF GOD BRING BACK THE PAYWALL!!!!
 
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NWAESC
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Re: Boeing CEO: A major US airline likely will go out of business this year,

Tue May 12, 2020 3:09 pm

hohd wrote:
The bureaucracy at many larger corporations are worse than most govt agencies.


If you haven't seen it, check out "Bullsh*t Jobs" by David Gareber. It's a great book, and will likely have you nodding in agreement in my places.
"Nothing ever happens here, " I said. "I just wait."
 
KlimaBXsst
Posts: 837
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Re: Boeing CEO: A major US airline likely will go out of business this year,

Tue May 12, 2020 3:11 pm

The Big 4

B R A N D S

are going nowhere. This is media hype is laughable. The parent company of the intellectual rights may change however. That is the reality of the situation.
Aesthetically the A 340 got it right!
 
kiowa
Posts: 731
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Re: Boeing CEO: A major US airline likely will go out of business this year,

Tue May 12, 2020 3:12 pm

hohd wrote:
SEPilot wrote:
ewt340 wrote:

Merge the 3 airlines and then have the government run it.

A guarantee of disaster. Government is fundamentally incapable of efficiency; name one thing ANY government runs well. And the ONLY force that leads to efficiency is competition.


I am in the private sector, and I can say that government agencies are more efficient with finances and they watch their spending more carefully than the private sector. The bureaucracy at many larger corporations are worse than most govt agencies.



I've been in both and neither sector has a monopoly on inefficiency.
 
FlyingElvii
Posts: 768
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Re: Boeing CEO: A major US airline likely will go out of business this year,

Tue May 12, 2020 3:14 pm

aemoreira1981 wrote:
I see American as most likely to file for bankruptcy. The question then remains as to which of the regionals will survive. AA currently fully owns 3 regionals: Envoy, PSA, and Piedmont.

As for regionals, I could see Mesa and Air Wisconsin as being in big trouble, and I only expect one of ExpressJet or CommutAir to survive. SkyWest is going to be the real beneficiary under CARES Act, although they will end DL CRJ2 flying this year (the DL-owned CRJ2s are headed back to DL while the OO-owned frames will likely be permanently retired.)

Sun Country will be an interesting case, as they're transitioning to a hybrid passenger and cargo airline (with B738 freighters).

Mesa is like the roaches, it just never dies. In this environment, cheapest flying wins over quality or dependability. I can easily see them getting new flying from other smaller carriers.

American: PSA is the easiest to let go of, all CRJ. Piedmont flying can easily be brought back to Envoy.
United: Commutair is the easiest to let go of. Air Whiskey has the advantage of owning much of what it flies, how low can you go? But, there are questions of the family already looking to sell it, before all of this began.
Delta: was already moving out of 50 seaters, and realigning the regionals. Selling DGS to Argenbright May turn out to have been a huge coup, the layoffs are not hitting the headlines as “Delta”.

My list of vulnerable majors.
IMO, Spirit seems to be the most vulnerable to “The New Reality”. Huge International exposure, and that simply is not coming back anytime in the foreseeable future. Leisure for the same reasons.
Frontier: No solid niche, duplicated routes. How long can they hold out for a recovery?
JetBlue: many of the same reasons as Spirit, was already facing some issues before this began. I see them retrenching to the Northeast. Pilot Contract will have to be revisited, perhaps to allow regional feed? Seems like the perfect time for it.

Possible?
Republic: Solid company providing a superior product, flying the superior product, and superior reliability, especially in the tough Northeast. And that suddenly no longer matters....
But needed to keep Skywest and the wholly-owned union groups honest.
It will be interesting to see what happens to them from here.
 
kavok
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Re: Boeing CEO: A major US airline likely will go out of business this year,

Tue May 12, 2020 3:21 pm

The other aspect that is being overlooked is the impact Chpt 11 filing by one airline would have on the other airlines.

Let’s say hypothetically AA does go through Chpt 11 and sheds much of its liabilities, and emerges a leaner carrier on the other side. What then happens with DL and UA? Basically, they would be at a huge disadvantage because DL/UA still have their debts, and are then competing with a future post Chpt11 AA who is at an advantage without those debts.

Basically, if one airline goes (and emerged out of) Chapter 11, then that negatively impacts everyone else because all of the other competitors are significantly disadvantaged.
 
frmrCapCadet
Posts: 4086
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Re: Boeing CEO: A major US airline likely will go out of business this year,

Tue May 12, 2020 3:23 pm

SEPilot wrote:
ewt340 wrote:
oxonrow wrote:
In endless pursuit of efficiency, one is most optimal? Late stage capitalism? Bring back regulation? Given environmental concerns, not unfathomable anymore?


Merge the 3 airlines and then have the government run it.

A guarantee of disaster. Government is fundamentally incapable of efficiency; name one thing ANY government runs well. And the ONLY force that leads to efficiency is competition.


There are entire sections of the economy at which the government is far more efficient than 'markets'. Utilities, insurance, pensions. The USPS is an amazing operations despite conservative lawmakers interventions to ruin it. And speaking of markets, the airline industry is rife with all sorts of market failures, as is medical care. You post any number of great things.
Buffet: the airline business...has eaten up capital...like..no other (business)
 
richierich
Moderator
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Re: Boeing CEO: A major US airline likely will go out of business this year,

Tue May 12, 2020 3:30 pm

kavok wrote:
The other aspect that is being overlooked is the impact Chpt 11 filing by one airline would have on the other airlines.

Let’s say hypothetically AA does go through Chpt 11 and sheds much of its liabilities, and emerges a leaner carrier on the other side. What then happens with DL and UA? Basically, they would be at a huge disadvantage because DL/UA still have their debts, and are then competing with a future post Chpt11 AA who is at an advantage without those debts.

Basically, if one airline goes (and emerged out of) Chapter 11, then that negatively impacts everyone else because all of the other competitors are significantly disadvantaged.


And this is what happened during the early 2000s. Of the big four, only WN didn't go through Chapter 11 and reorganize. AA, UA and DL all did and were able to shed significant portions of their debt, essentially coming out much stronger carriers than they were prior to BK. A few mergers later, here we are. Four huge US carriers that make up about 80% of the overall ASMs across the country. Note, this is not a criticism, it's how it works in this country, but we are now at the point where I'm not sure we could afford to lose one of the four. They are too big, a shutdown would affect so many areas of the country, especially regionally where the hubs are located, and the job losses in these regions would be staggering.
Last edited by richierich on Tue May 12, 2020 3:32 pm, edited 1 time in total.
None shall pass!!!!
 
FlyingElvii
Posts: 768
Joined: Wed Dec 27, 2017 10:53 pm

Re: Boeing CEO: A major US airline likely will go out of business this year,

Tue May 12, 2020 3:32 pm

IAmGaroott wrote:
I can see all of the big 4 scaling back on fleets, hubs, destinations, staff, etc., but none of them are going away. AA will probably be United-sized or smaller when it’s all said and done.

B6, NK, F9, and AS can’t all exist in this new climate. I’m not sure how that will play out, but based upon the numbers, AS and NK will probably be fine. HA will be fine as well.

I think the regional carriers will be hit the hardest and the government may have to step in to keep select routes flying.

With the pilot shortage now over for at least the next ten years, it appears that niche players like Contour or Cape may have the advantage there.
140’s AND 45’s are now DIRT CHEAP.

This is a business Contour was already building before this began. They also have the management side that will be growing dramatic in the near term.
Cape has the Tecnam coming, and is already poised to operate the Cessna’s new SkyCourier.

I like the SkyCourier, and I think the worldwide demand for it just exploded, if Textron doesn’t get greedy and screw this up. In the US, the soon-to-be glut of available pilots now makes this a real possibility for regional flying. Until the economy comes back, if it ever does, 19 pax flying is the way a lot of city pairs are going to stay connected.
 
JAMBOJET
Posts: 279
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Re: Boeing CEO: A major US airline likely will go out of business this year,

Tue May 12, 2020 3:39 pm

chonetsao wrote:
Everyone think AA is the candidate. But I don't think so. Guess who has the most unsecured assets that is easily slip beneath the radar?

There is one US airlines own stakes in Virgin Atlantic, Korean Air, Aeromexico, LATAM, AF/KL and an oil refinery company (I think China Eastern as well?). That is a lot of money tied to several struggling companies around the world. What damage those other airlines will bring to the parent holding company in the US? How much more money this US airline needs to sink to maintain its investment? And how much loss it can take from the oil refinery while the oil price is below USD$30?

Sometimes the most obvious answer might not be the true answer. When the oil price was high, AA did not hedge and it saved its day when oil price collapse. Maybe in 2020, it is airline that does not have too many investment tied to other airlines and other activities would save itself.


I think you're right that Delta will have to write down a lot of assets on their balance sheet after this is all over and definitely rethink their international strategy depending on who's left, and in what way, at the end of this pandemic. But... their strength domestically (independent of their international partners) is just a bit too strong for me to agree that they're in as much danger as you suggest. Despite the write-down of the assets you mentioned, they still have a relatively strong balance sheet.

At worst, Delta will retrench into more domestic focus and retrench into their existing AF-KL and KE partnerships to keep International connectivity. Their international investments don't require them to prop them up. At worst, they'll just write down those equity holdings and move on.

Their refinery, for instance, has basically zero value to anyone (they've been trying to sell it for how long now?), including Delta. The crack spread just doesn't matter at the moment. All Delta really needs to do is shutter it eventually. I guess there's some expense related to shutting it down with environmental concerns, etc. But nothing that is going to bankrupt Delta.
 
FlyingElvii
Posts: 768
Joined: Wed Dec 27, 2017 10:53 pm

Re: Boeing CEO: A major US airline likely will go out of business this year,

Tue May 12, 2020 3:39 pm

Max Q wrote:
No one really knows where this is all going


I do think the Cares act was in the National interest but it should have been for 12 months rather than 6 allowing more time for a recovery


Another financial ‘booster shot’ for the industry may well be necessary for the industry in October and I think all the airlines should start lobbying for that now

Not going to happen...
Hundreds of thousands of unemployed people hitting the streets, and headline bankruptcies is already being perceived as helping one US political party, and hurting another. That is why CARES could only be supported as it was until October.
 
KlimaBXsst
Posts: 837
Joined: Wed Jan 23, 2019 4:14 pm

Re: Boeing CEO: A major US airline likely will go out of business this year,

Tue May 12, 2020 3:42 pm

While predictions are being made about speculative airline closures...

the Mainline carriers regional feeder systems will surely have some changes. However people will still need to get to Erie, PA and Killeen, TX.

Air travel is essential even in smaller regions.
Aesthetically the A 340 got it right!
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