Posts tagged airline bankruptcy
This has been a very bad year for the airline industry with several carriers going out of business. ExpressJet became the latest, announcing that it would cease operation on September 2. It joins Aloha, ATA, Eos, Maxjet, Silverjet, and Skybus, all of which shut down earlier this year.
Business plans that seemed intelligent and fiscally sound three years ago have crumbled before the challenge of $140 a barrel oil. With the exception of Southwest, every airline has added a variety of fees and surcharges, including extra charges for a second piece of checked luggage, a first piece of checked luggage, using frequent flyer miles to get a ticket, using the phone to buy a ticket, and curbside check-in, among others.
US Airways announced that it will discontinue in-flight movies: removing the video system will lower the weight of the aircraft by 500 pounds, saving thousands of gallons of fuel a year per plane. It is reasonable to expect this trend to continue.
When I read of ExpressJet’s closing, I started to think about airlines I had flown on in the past that are no longer in business. Some of these companies went out of business, some merged with other carriers. Whatever the cause, we no longer have aircraft with these names pained on the side. These descriptions are not meant to be complete, you can research these airlines on your own to learn more about them. Hopefully this list will remind you of airlines past.
Northeast Airlines: Northeast offered service from NewYork/Boston/Philadelphia/Washington to Florida and Puerto Rico. It was founded in 1931, it merged with Delta Airlines in 1972. I flew Northeast from New York to Miami in the late 1960s.
Pan American World Airways: Pan Am will be long remembered as one of the great aviation pioneers. Pan Am was founded in 1927. Its flying boats, known as “clippers” eventually offered service from the United States to Europe, South America, and China. In 1970 it became one of the first airlines to fly the Boeing 747 jumbo jet: a December 1988 terrorist bombing caused Pan Am flight 103 to crash in Lockerbie, Scotland, killing a total of 270 people. Pan Am declared bankruptcy in January 1991 and ceased operations in December of that year. I flew Pan Am once, from Nassau, Bahamas, to New York.
Trans World Airlines: TWA was formed in 1930. In 1938 Howard Hughes and his Hughes Tool Company began buying stock in TWA: he continued investing in the airline, eventually gaining control in 1946. He sold his shares in 1966 for a profit of more than $500 million. In 1967, TWA became one of the first airlines in the world to boast an all-jet fleet. TWA fared badly after airline deregulation and file for bankruptcy protection in 1995. TWA merged with American Airlines in 2001. I flew TWA between Austin and St. Louis.
Braniff Airlines: Braniff was formed in 1928, eventually offering service between the American Midwest and South American, Europe, and Asia. It became most famous in the 1960s and 70s when it adopted new design standards that would make its aircraft stand out from other airlines. It was not unusual to see brown, purple. baby blue, orange or turquoise Braniff aircraft. They redesigned their gates and terminals to match the new designs, and gave the flight attendants new, more fashionable uniforms. In 1973 the airline hired Alexander Calder to paint its aircraft. As with other airlines, Branif fared badly after deregulation and filed bankruptcy in 1982. I flew Branniff from Austin to Kansas City.
America West Airlines: America West began offering service from Phoenix, Arizon, in 1983. It rapidly expanded offering service through the American West with Phoenix as its main hub. It grew rapidly, but perhaps too quickly and was not profitable. By the late 1980s it was trying to establish international routes, offering service to Japan and Mexico, but it never had a strong balance sheet. The rise in fuel costs prior to the 1991 Gulf War forced it into bankruptcy, but it continued to fly under bankruptcy protection until 1994. A reorganized America West was created in 1994, but, along with other carriers, lost a lot of business after the 9/11 terrorist attacks. In 2005 it merged with US Airways and took that name. I flew America West from Austin to Las Vegas.
And there you have it, a list of airlines that are now fond memories. Let us hope that no other airlines will join this list.
What airlines have you flown on that are no longer in business?
Last week Delta and Northwest Airlines announced plans to merge and become the world’s largest airline. At first glance the merger seemed to be a wonderful idea: Northwest offers many routes from the United States to Asia, while Delta offered strong service to Europe. Their main hubs are in different parts of the country which would minimize the number of routes on which they directly compete. It seemed a great idea.
I had never considered using either airline because they did not offer as many options from Austin as American Airlines does, but the newly created Delta Airlines would be so large that I realized I had to give serious thought to changing my mileage runs to them.
And then the quarterly reports came out. Delta announced that it had lost $6.4 billion in the previous quarter. Northwest lost a more mundane $3.2 billion, giving them a combined total loss of more than $10.5 billion in one quarter. The numbers are staggering.
Let’s look at Delta. There were 91 days in the quarter: that means that during that period Delta lost $70,329,670 per day! How do you loose that kind of money? Yes, fuel costs have gone up, but not by $70 million per day! In fact, Delta announced that its fuel costs for the quarter were $1.4 billion, admittedly a huge number, but even if their fuel had been free they still would have lost $5 billion in 91 days!
Compare their loss to that at other airlines for the same period:
- United Airlines — $537 million loss
- American Airlines — $328 million loss
- Continental Airlines — $80 million loss
- Southwest Airlines — $34 million profit
- Northwest Airlines — $3.2 billion loss
- Delta Airlines — $6.4 billion loss
Can anyone look at those numbers and reasonably think that combining the last two airlines on that list is a good idea? One can look at the losses at United, American, and Continental, and say “If it wasn’t for the fuel hikes, they would have made a profit.” But there is no way to say that for the last two!
Is there a problem with Delta management? Are there problems with Delta’s union contracts? I don’t know, but the size of the loss is beyond comprehension. And here is one thing that makes it worse: the newly merged airline would have its headquarters in Atlanta at Delta’s current headquarters, and Delta’s current CEO Richard Anderson would be the CEO of the new airline.
Richard Anderson of Delta and Doug Steenland, CEO of Northwest, testified before Congress last week, saying that the merged airline would be stronger and better able to compete with foreign carriers that sometimes operate with generous government subsidies. They said no hubs would be closed, and only 1,000 people, mostly at headquarters, would lose their jobs. They predicted the combined airline could save $1 billion a year in operating costs. Congress loves to hear things like this and the committee seemed supportive of the plan.
However, a $1 billion annual savings does not sounds so grand when compared to a combined $10.5 billion loss in one quarter. In the week since the merger, Wall Street has expressed its displeasure of the plan, selling off the stock of both airlines, creating drop in value of the two of more than $1 billion.
If the Delta-Northwest merger goes through, experts expect a merger between Continental and United, and American and US Airways. When that happens, the majority of air travel in the United States will be controlled by four major airlines (the three merged lines, and Southwest).
Is that good for the consumer? No.
The best analysis I have seen of the proposed merger and other possible airline mergers was posted on Inside Flyer.
Given all of this, I’ll be staying with American Airlines.
In other airline news, another airline has announced it is filing for bankruptcy and will cease operations Monday. Eos Airlines, a business-class only airline that offered service between New York JFK and London Stanstead filed for Chapter 11 bankruptcy. It is the fourth American airline this month (following Aloha Air, ATA and Skybus) to file for bankruptcy and cease operations. Frontier also filed for bankruptcy but has continued to fly.
In the meantime, fuel costs continue to rise, putting additional pressures on all remaining airlines.
There are good weeks. There are bad weeks. And then there are weeks that just suck the life out of you. That’s what the airline industry went through this week.
Aloha Airlines announced it would cease operations on Tuesday, March 31. The 60-year old airline had filed for bankruptcy 10 days earlier; it had previously filed for bankruptcy in 2003. Aloha had had difficulty matching the low fares offered by go!, a discount airline that started flying between the Hawaiian Islands in June, 2006. go! offered fares as low as $19 on the inter-island routes. One year later go! offered $1 fares to celebrate its first anniversary.
Aloha’s closure leaves go! and Hawaiian Airlines as the main inter-island carriers. Hawaiian, like Aloha did, offers service to several locations on the mainland.
Talks collapsed in Air France/KLM’s bid to take over troubled Alitalia Airlines. The Franco-Dutch conglomerate planned to buy the 49.9 per cent share in Alitalia owned by the Italian government, but talks failed when Alitalia’s unions submitted a proposal that Air France/KLM found unacceptable. In response to the collapse, Alitalia’s chairman, Maurizio Prato, resigned.
Alitalia is losing one million Euros a day and is expected to file bankruptcy and cease operations within the next 60-90 days if there is no solution. If it shuts down, it will join two other national carriers, Swissair (Switzerland) and Sabena (Belgium) that have failed.
ATA files for bankruptcy and ceases operations effective Thursday.
The majority of ATA ‘s business came from flying charters, many for the American military. It also offered scheduled flight service between Hawaii and four west-coast cities. It offered a code-share with Southwest Airlines that gave Southwest passengers a way to fly to Hawaii.
All 2,300 ATA employees were notified that their positions had been eliminated.
With the loss of ATA and Aloha Airlines and their flights, industry analysts expect an increase in air fares to Hawaii. Hawaiian Airlines is trying to fill the void, announcing that it will begin service between Honolulu and Oakland, California in May.
Congress holds hearings into relationships between the Federal Aviation Administration (FAA) and Southwest Airlines. The FAA had earlier fined Southwest over $10 million for flying aircraft that were late on their inspections.
In the hearings it was revealed that Bobby Boutris, an FAA inspector had uncovered problems with the FAA’s oversight of Southwest Airlines in 2003. His efforts to correct the problem not only went no where, but he lost his his position with the FAA, had to deal with retaliation and scorn from many of his co-workers, and even received an anonymous death threat. The hearings confirmed that the FAA had been too “friendly” with the airlines it was supposed to regulate; Boutris received a written apology from US Transportation Secretary Margaret Peters. (read the complete article in the Dallas Morning-News.)
American Airlines (AA) announced a hiring freeze on new employees. Anyone offered a job before April 1 would still be hired, but there would be no additional new hires. The move was in response to American’s growing budget problems caused by rising fuel costs. AA predicts its fuel costs for the year will be $9.3 billion, up 39 per cent from the year before.
Champion Air, a charter carrier, announced it would cease operations on May 31.
All in all, a bad week with three airlines going out of business, one ready to, and deficiencies in the way that air safety is regulated. The good news is that air travel remains safer now than it has ever been. And after what happened this week, it will get safer as the FAA more strictly enforces its oversight role. We may see more situations like we saw last week when American Airlines canceled hundreds of flights so it could conduct needed inspections, but if that is what it takes to make air travel safer, then we all benefit from it.