Airlines earnings: More trouble than expected
The International Air Transport Association in March projected global airlines would lose $4.7 billion this year compared to $8.5 billion last year. The number for 2009 is almost certain to be worse than the forecast from three months ago as both passenger and freight loads drop.
The news reopens the question of whether all of the major U.S. carriers will survive as they are or whether there is more consolidation ahead that could turn two American airlines into one.According toBloomberg, the IATA chief said, "The economy isn't moving forward despite some optimism in the financial market." The statement is troubling both because his assessment of the global recovery is downbeat and because airlines may not have access to the credit that they need to keep operating with large losses.
There has been a great deal of talk that American Airlines (AMR) cannot stand on its own if its losses increase through the year. If oil moves from $67 to a price $10 to $15 above that, airlines would be faced with the crippling fuel costs that came close to taking some of them under last year.
Big airline M&A may be back on the horizon again.
Douglas A. McIntyre is an editor at 24/7 Wall St.