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Airlines to lose $11 billion

Posted Sep 16 2009, 06:03 AM by Douglas McIntyre
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Public domain releaseThe global airline industry, still staggering from huge losses and bankruptcies late last year after oil prices passed $140 a barrel, is not doing much better in 2009. Low passenger traffic is the chief culprit, but crude at $70 after a sharp dip early in the year puts on significant additional pressure.

The International Air Transport Association (IATA) released its new forecast for worldwide airline losses this year and it moved up $2 billion to $11 billion. “The bottom line of this crisis – with combined 2008-9 losses at $27.8 billion – is larger than the impact of 9/11,” said Giovanni Bisignani, IATA’s Director General and CEO.

The industry is so heavily burdened with debt that weak demand during the upcoming holiday season will threaten to sink some carriers. Japan Air has already announced nearly 7,000 layoffs and the Asia carrier is looking for a cash infusion from AirFrance-KLM or a major US carrier–perhaps American Airlines.

The financial situation in the North American market is particularly acute. The IATA is expecting losses in the region to be $2.6 billion rather than the $1 billion it previously forecast. Wall Street has shown its concern about the weakest carriers by pushing the shares of US Air (LCC) down 40% this year and the shares of American (AMR) down more than 30%.

Filing for Chapter 11 is a time-honored tradition in the U.S. airline industry. It allows carriers to cut debt and force union concessions on jobs and pay. With Thanksgiving and Christmas coming, unless there is a miraculous turn up in traffic, one or more carriers will lose their independence or will have to seek court protection.

Top Stocks blogger Douglas A. McIntyre is an editor at 24/7 Wall St.

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Comments

 

Lengthen the distance between coach seats please...THAT will help...at least then the 2d class seats won't seem as uncomfortable as 1st class hello...THAT will really help the economy also...I fly maybe once, twice a year, but I NEVER, repeat, NEVER go for the airmiles, and I've put alot of em on since 1970...

Lengthen the distance between coach seats, I'm talkin in front and behind...that will help the economy

Flying has gone from an ordeal to being positively abusive especially with being charged for everything and anything for this most uncomfortable of experiences.  It's no wonder people are electing other alternatives.  

If these parasites wouldn't charge for every damn thing imaginable, maybe the general public would start flying again.  But as long as they are, i for one plan on driving to my destinations.

The bottom line is that the airlines are too large and not efficient. They need to simply downsize to a point where they can offer a great product at a reasonable price. I can accept a charge for a second bag but the first one should always be free and the weight limit be say 60lbs. Start restricting the hand luggage that delays and overcrowds are our flights every day. Meal service in economy is a hit and miss proposition I believe like continental did that serve sandwiches which when I remember flying them as acceptable and sufficient. I do like the innovative idea of back seat entertainment and wi-fi that is a big positive. Cleaning the aircraft more often carrying blankets like they used to makes a big difference on the perception of air travel.

However customer service is lacking because if management is not caring! Why should the employees. I guarantee if the airlines made flying more simpler not as much as cost just avoiding the whole nickel and diming they can be very successful in achieving a higher passenger yield as well achieving cost savings.

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