Frontier Airlines Holdings Inc., the U.S. discount carrier that serves 70 destinations from Denver, filed for bankruptcy protection, becoming the fourth U.S. airline to do so in less than a month.
Frontier took the step after its main credit-card processor began withholding proceeds from ticket sales, it said in a statement today. The carrier pledged to continue flying and keep paying workers while it seeks additional financing.
``We filed for very different reasons than those of other recent carriers,'' Frontier Chief Executive Officer Sean Menke said in the statement. ``Fortunately, we believe that we currently have adequate cash on hand to meet our operating needs while we take steps to further strengthen our company.''
Frontier Airlines has debt of $500 million to $1 billion and about the same in assets, according to Chapter 11 documents filed with the U.S. Bankruptcy Court in Manhattan. A slowing economy and jet fuel costs that have risen 60 percent in a year were blamed for recent filings of Skybus Airlines Inc., Aloha Airgroup Inc. and ATA Airlines Inc.
In Asia, long-haul budget carrier Oasis Hong Kong Airlines Ltd. ceased flying after 17 months on April 9, stranding thousands of people in Hong Kong, the U.K. and Canada. Chairman Raymond Lee cited the spiraling price of fuel for the step.
This is one of the biggest impacts from spiking fuel costs -- spiking transportation costs. Anyone who is not seeing inflation bleeding into every nook and cranny of the economy just isn't looking closely at the big picture.
Howard Lindzon offered some colorful (and deadly accurate) commentary about the airlines:
We are one disaster away from another massive airline bailout ‘crisis’ and other than the airline industry itself, the market could care less. All media eyes are focused on the Bear Stearn’s hearings, but forgets the bazillions the government pissed away after 9/11 saving unsavable businesses and useless executives. NO PAYBACK on those crappy loans.
I am always amazed that our piece of shit Airlines can keep planes in the sky. The same crew of cowboy (they call themselves that)/criminal executives has no incentive to make money.
They have everyone to point fingers at to deflect childlike operating prowess. Unions, Wages, Fuel, Maintenance, Terrorism….
If you are a common shareholder you are being raped.
I am first to be thankful that we are free to fly. It is one of our greatest freedoms, but we need a real plan. Obviously, nationalizing won’t work.
The prices of flying are completely ridiculous. Because it is one of our greatest freedoms, not priviledges, the price should truly reflect the freedom. If anywhere close to true competition existed, ticket prices would be much higher and we would have cheap/workable video conferencing. We would lose Vegas, but let’s face it…Vegas is lame.
He's right about the increasing possibility of a bail-out occurring. Four bankruptcies in a month is a sign there is something really wrong with the current structure of the business.
Short version -- the airlines are clearly in very deep trouble right now, and we have the following chart to thank for it:
Let's look at the airline industry charts. Prophet.net breaks them down into two areas -- the majors and the regionals:
The majors were clearly in a funk until mid-2006 when they broke out. The spike in 2007 is probably the result of a merger rumor (although I can't remember exactly what the story was. Anyone who remembers please chime in). But the majors have dropped with the rest of the market since last summer.
The regionals were also in a funk for most of the latest rally. They broke out in late 2006, but broke that trend at the end of last summer along with the rest of the market.
I see no reason to think this sector will do anything except languish for the foreseeable future. Between rising oil and a slowing economy that will diminish traveling, the airlines are getting hit from all fronts.
3 comments:
I envision an entirely new paradigm for air travel: Very expensive direct inter-city flights for those demanding it, but very cheap flghts in and out of six huge regional hub aiports in the middle of nowhere (call them NE, SE, N, S, NW, SW) with only shuttle flights from those hubs into each city only as the shuttle planes fill up.
I envision those shuttle planes having confortable seating (not cattle-class style as now) with some family friendly seating sections, on planes large enough that the airline running the shuttle service will guarantee at least one flight into and out of every city, every two hours, more often if there is demand.
The shuttle planes would be anything from puddle-hoppers to jumbo-jets as long as they (usually) fly full.
The airline would need ONE gate in ONE terminal in EACH city, because the only place the airline would fly from the city would be to the regional hub. From there, passengers would transfer to a shuttle for their destination city if it's served by the same regional hub, or to a jumbo-jet connecting to one of the five other regional hubs, and then onto another city shuttle from there.
No reservation system, no reserved seating (except special cases), all maintenance done at the six hubs, all crews based at the hubs, family friendly hub environments, and above all, low fares on full planes with frequent (albeit unscheduled) flights to EVERY city in the country.
If the model takes off, there would be no reason not to expand the model internationally all around the globe.
I know this is a radical vision, but the more I think about it, the more I am convinced it will succeed profitably. How the hell do I interest someone in making this happen?
I know of a six foot tall rabbit who might listen to you.
There were two major rumors last year. United with somebody (...anybody....) and Delta with Northwest.
Two things we really need to do to help the airline industry would be to have one major merger, and to allow foreign ownership of our airlines to rise to around 45%. The infusion of capital would help, and a situation where KLM makes a major purchase into Northwest or British Airways makes a major purchase into United or US Air would force competitive investment into the remaining airlines we have, and push out those not considered worth buying into.
That said, I suspect Delta is the next airline to be looking at the edge of the cliff, one way or another. United's debt situation is more delicate, but we seem to have a thing going, thanks to Northwest, regarding killing off the "expensive help" (in Delta's case, most especially the pilots).
My two bits...
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