What will happen in the Airline industry in the US.
US Airways, the nation’s seventh largest airline by traffic, is struggling at the moment after filing for bankruptcy last September for the second time in as many years. Because of expensive fuel, low fares and excess capacity other airlines are watching closely to see if US Airways will emerge a healthier company from the bankruptcy, if they will merge with someone else or if they eventually go out of business. The competitors would undoubtedly cheer if US Airways would go under since many other carriers are having difficulties operating in this tough business climate.
After the boom in the 1990’s due to low fuel prices and planes being full of high paying customers the business slumped after the 2001 terrorist attacks and many of the airlines have never been able to regain their profitable momentum since. The company is trying everything it can to stay alive and talks with America West Holding Co., the nation’s eight largest carrier, to unite their operations are under way.
Views differ about the potential impact a liquidation of the company would have on the airline industry. The company going under would undoubtedly ease up some pricing pressure across the board and the industry would probable see more pricing stability and fewer price cuts. On the other hand if the two above mentioned companies would merge they could potentially create a stronger, bigger airline that would have a presence nationwide.
How will the outcome of this affect the industry? The fewer the company’s the higher the risk of higher pricing which would affect the customers.
You can reed the whole article here.
http://www.boston.com/business/personalfinance/articles/2005/04/26/airline_industry_focuses_on_us_airways/
After the boom in the 1990’s due to low fuel prices and planes being full of high paying customers the business slumped after the 2001 terrorist attacks and many of the airlines have never been able to regain their profitable momentum since. The company is trying everything it can to stay alive and talks with America West Holding Co., the nation’s eight largest carrier, to unite their operations are under way.
Views differ about the potential impact a liquidation of the company would have on the airline industry. The company going under would undoubtedly ease up some pricing pressure across the board and the industry would probable see more pricing stability and fewer price cuts. On the other hand if the two above mentioned companies would merge they could potentially create a stronger, bigger airline that would have a presence nationwide.
How will the outcome of this affect the industry? The fewer the company’s the higher the risk of higher pricing which would affect the customers.
You can reed the whole article here.
http://www.boston.com/business/personalfinance/articles/2005/04/26/airline_industry_focuses_on_us_airways/
8 Comments:
At 1:49 PM, Waltham said…
Some comments in reference to the bankruptcy situation that many airlines face today would be....Banktruptcy is a closure on debt owed. Depending on what chapter is filed, the debit is absorbed by some party in the economy. In many cases poor business practices have lead companies into these proceedings. It could of been that a company did not have a contingency plan, too high of a break even point, spending practices set on favorable conditions, along with many others. There needs to be a reform in the airline industry to regenerate profits, not a risk free operating system. I agree that recent terrorist attacks have added difficulty to the situation, but reform could restore confidence. I also believe without holding consumers responsible for airline losses there should be an independent government based aubit agency. So mabe losses would not be passed on to consumers.
At 6:31 PM, n scott said…
It is no suprise to see many airline companies going bankrupt. With the terrorist attacks and higher prices on fuel and other things. Maybe with the combination of the two companies, there might be a way for the airlines to make profits and stay in business.
At 8:03 AM, alabama said…
I doubt that the answer to their crisis is just filing bankruptcy and merging with another company. I believe that the reasons for these constant losses is something more serious than high fuel prices, low fares and excess capacity. If you look at Southwest, which is the only airline that seems to be doing good inspite of high fuel prices and low fares; they even survived the hard times following the terrorist attacks without laying off their employees. What is Southwest doing that other airlines are failing to do? There must be something wrong in the top level management that has to be fixed otherwise these ghosts will continue to hunt the airline.
At 1:20 PM, anxious said…
I think with so many airlines in competition that merging with another company may be their best bet. If they are having financial problems now with the fuel prices so high, they might need to bail out now. The fuel prices don't seem to be decreasing anytime soon.
At 4:38 PM, Micah said…
Most airlines are suffering due in part to 9/11 and the high gas prices. US Airways attempts at staying alive are probably being watched very closely by other airlines. I'm sure there is some hope on their parts that the airline will shut down and some competition will be eliminated. However, they probably want to see how they achieve the success of staying in business if they actually do manage it. If another airline starts having the same problems, they would most likely try to survive by copying a successful attempt of a competitor.
At 1:58 AM, James Gerber said…
"Alabama" has it exactly right. Additionally, instead of remaining dependant on government subsidies to stay afloat, these companies should be innovating the overall flight experience from gate to gate, or, at least, copy Southwest's business model. Businesses should be PROACTIVE, not REACTIVE. Look at non-commercial railway travel for goodness sake. Airlines better not leave an open window through which a new, unforeseeable technology can emerge. Our wallets look to be hurt no matter what happens, though...
At 11:13 PM, prmars said…
Unfortunately, only the first creditors in line ever have a chance of receiving part of their money due during a bankruptcy case. Filing bankruptcy is definitely not the answer for US Airways. There is a problem with merging with another airline, however. With a reduction of airlines serving a given market (say, Montgomery), you end up with even higher fares to fly into and out of that market. Montgomery no longer has any true national carriers, but rather a series of regional carriers (US Airways is technically a National Carrier, but you can only fly to Charlotte, NC) that require a transfer to another airline or a larger arm of the regional carrier. The only thing that will really give US Airways a chance is to standardize their equipment to only a couple of easy to maintain aircraft types and migrate to a no-frills, value oriented service, like JetBlue or Southwest. Interestingly enough, this is the move the company is attempting to make, but capital shortages are making the transition very difficult.
At 8:31 PM, AO2001 said…
While the public air industry has undoubtedly suffered setbacks since the 911 attacks, it is an industry that is destined to succeed. There is a sizeable market of world travelers that cannot be deterred. This includes displaced nationals living abroad and a multitude of corporate businessmen who simply must travel at any cost to effectively handle business.
This market guarantees that the airline industry will not perish. What is not guaranteed is the size of the available market once strictly tourist travel ebbs at its low. It is most likely not a question of who provides the best service, but who can stay in the game long enough to emerge the winner in the new inflated market that is certain to follow this low point in the market.
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