News

    US Airlines Northwest, Delta May Consolidate

    Airline analysts say it was soaring jet fuel costs that finally pushed financially strapped Delta and Northwest airlines into court-protected bankruptcy this week. 

    Four of the seven largest U.S. airlines are now operating under bankruptcy protection. United and U.S. Airways have been in bankruptcy since shortly after the September 11, 2001 terrorist attacks, which together with recession triggered a sustained drop in airline traffic.  Since 2000, U.S. airlines have lost $38 billion.  Analysts say that the sharp rise in jet fuel prices this year, particularly after Hurricane Katrina, precipitated the court filings of Northwest and Delta.

    Gordon Bethune, the retired former chairman of Continental Airlines, tells Bloomberg News he does not expect a recovery anytime soon.  "We have a dysfunctional industry with overcapacity that can't price their product to the expense level oil generates," he explained.  "That's got to change and it will change. But it is the traumatic way it is changing, like bankruptcy, in which nobody wins, not employees or the shareholders."

    While in bankruptcy protection an airline is exempted from its labor and other contracts and operates under the supervision of the court. Some analysts say United and U.S. Airways gained a competitive advantage from bankruptcy because they were able to abrogate wage agreements and stop paying employee pensions.

    U.S. based airlines have fared worse in today's brutally competitive markets than have their European and Asian rivals.  Despite new entrants into what were more regulated markets, competition and excess capacity are greater in the United States. Swissair, Switzerland's flag carrier, as well as its Belgian affiliate Sabena, did collapse in 2001 but that is usually blamed more on poor management than competition.

    Michael Boyd, an industry analyst near Denver, Colorado, is relatively optimistic that Northwest will emerge from bankruptcy as a stronger carrier.

    "Northwest is very well positioned because it is in the right kind of markets to access what we call Sino-centric growth which is in the American south and Midwest and in China," said Mr. Boyd on Bloomberg Television.  "But if they get their costs down their revenue stream is what saves them. Delta, I'm not really sure. They're over-invested in 50 seat jets, their route system is weak, and they're not big in Asia where they need to be. So they're going to have a much harder time getting through this."

    The only U.S. airline that has been consistently profitable in recent years is Southwest, whose stock value exceeds that of all other U.S. carriers combined.  The biggest and oldest carriers like Northwest and Delta have high costs and pension liabilities that a young company like Southwest does not have.

    Eventually, say the analysts, there will be liquidations and consolidation in the U.S. airline industry. But the malaise is not likely to end anytime soon as competitive forces are preventing companies from raising fares high enough to cover costs.

    This forum has been closed.
    Comments
         
    There are no comments in this forum. Be first and add one

    Featured Videos

    Your JavaScript is turned off or you have an old version of Adobe's Flash Player. Get the latest Flash player.
    Brexit Vote Plunges Global Markets Into Uncharted Territoryi
    X
    June 24, 2016 9:38 PM
    British voters plunged global markets into unknown territory after they voted Thursday to leave the European Union. The results of the Brexit vote, the term coined to describe the referendum, caught many off guard. Analysts say the resulting volatility could last for weeks, perhaps longer. Mil Arcega reports.
    Video

    Video Brexit Vote Plunges Global Markets Into Uncharted Territory

    British voters plunged global markets into unknown territory after they voted Thursday to leave the European Union. The results of the Brexit vote, the term coined to describe the referendum, caught many off guard. Analysts say the resulting volatility could last for weeks, perhaps longer. Mil Arcega reports.
    Video

    Video Orlando Shooting Changes Debate on Gun Control

    It’s been nearly two weeks since the largest mass shooting ever in the United States. Despite public calls for tighter gun control laws, Congress is at an impasse. Democratic lawmakers resorted to a 1960s civil rights tactic to portray their frustration. VOA’s Carolyn Presutti explains how the Orlando, Florida shooting is changing the debate.
    Video

    Video Tunisian Fishing Town Searches for Jobs, Local Development Solutions

    As the European Union tries to come to grips with its migrant crisis, some newcomers are leaving voluntarily. But those returning to their home countries face an uncertain future.  Five years after Tunisia's revolution, the tiny North African country is struggling with unrest, soaring unemployment and plummeting growth. From the southern Tunisian fishing town of Zarzis, Lisa Bryant takes a look for VOA at a search for local solutions.
    Video

    Video 'American Troops' in Russia Despite Tensions

    Historic battle re-enactment is a niche hobby with a fair number of adherents in Russia where past military victories are played-up by the Kremlin as a show of national strength. But, one group of World War II re-enactors in Moscow has the rare distinction of choosing to play western ally troops. VOA's Daniel Schearf explains.
    Video

    Video Experts: Very Few Killed in US Gun Violence Are Victims of Mass Shootings

    The deadly shooting at a Florida nightclub has reignited the debate in the U.S. over gun control. Although Congress doesn't provide government health agencies funds to study gun violence, public health experts say private research has helped them learn some things about the issue. VOA's Carol Pearson reports.
    Video

    Video Trump Unleashes Broadside Against Clinton to Try to Ease GOP Doubts

    Recent public opinion polls show Republican Donald Trump slipping behind Democrat Hillary Clinton in the presidential election matchup for November. Trump trails her both in fundraising and campaign organization, but he's intensifying his attacks on the former secretary of state. VOA National Correspondent Jim Malone reports.
    Video

    Video Muslim American Mayor Calls for Tolerance

    Syrian-born Mohamed Khairullah describes himself as "an American mayor who happens to be Muslim." As the three-term mayor of Prospect Park, New Jersey, he believes his town of 6,000 is an example of how ethnicity and religious beliefs should not determine a community's leadership. Ramon Taylor has this report from Prospect Park.
    Video

    Video Internal Rifts Over Syria Policy Could Be Headache for Next US President

    With the Obama administration showing little outward enthusiasm for adopting a more robust Syria policy, there is a strong likelihood that the internal discontent expressed by State Department employees will roll over to the next administration. VOA State Department correspondent Pam Dockins reports.
    Video

    Video Senegal to Park Colorful ‘Cars Rapide’ Permanently

    Brightly painted cars rapide are a hallmark of Dakar, offering residents a cheap way to get around the capital city since 1976. But the privately owned minibuses are scheduled to be parked for good in late 2018, as Ricci Shryock reports for VOA.
    Video

    Video Florida Gets $1 Million in Emergency Government Funding for Orlando

    The U.S. government has granted $1 million in emergency funding to the state of Florida to cover the costs linked to the June 12 massacre in Orlando. U.S. Attorney General Loretta Lynch announced the grant Tuesday in Orlando, where she met with survivors of the shooting attack that killed 49 people. Zlatica Hoke reports.
    Video

    Video How to Print Impossible Shapes with Metal

    3-D printing with metals is rapidly becoming more advanced. As printers become more affordable, the industry is partnering with universities to refine processes for manufacturing previously impossible things. A new 3-D printing lab aims to bring the new technology closer to everyday use. VOA's George Putic reports.
    Video

    Video Big Somali Community in Minnesota Observes Muslim Religious Feast

    Ramadan is widely observed in the north central US state of Minnesota, which a large Muslim community calls home. VOA Somali service reporter Mohmud Masadde files this report from Minneapolis, the state's biggest city.

    Special Report

    Adrift The Invisible African Diaspora