According to an article in USA Today, airlines are taking a financial beating as the recession worsens and many travelers cutback due to job loss fears.
The article said:
Leisure travelers have been worried about losing their jobs. To lure nervous vacationers, carriers have slashed summer fares, and experts report some of the cheapest travel prices in years.
All the major U.S. carriers except Southwest lost money last year. The leader of an international airline trade group said last week that worldwide the industry will lose $9 billion this year – nearly double the loss the organization predicted in March.
No major airlines have filed Chapter 11 bankruptcy yet; but we may see some eyeing their bankruptcy options if the recession doesn’t improve over the next two years or if travel demand continues to decline. Right now, airlines are working diligently to avoid bankruptcy by making deep cuts in capacity and labor.
American airlines has already announced that it will implement 1600 job losses and Delta and United may implement their own cost saving strategies to avoid bankruptcy. Right now, we’re not experiencing major airline bankruptcy filings because the airlines are still benefiting from the previous bankruptcies they filed during the last recession.
Using their previous bankruptcy filing, Delta, United and US Airways were able to reduce debt and cut their labor costs avoiding some of the financial pain in this recession. We will see if those changes will help them weather this storm.