Discount Airlines Become Vulnerable
The screws are tightening on the weakest carriers, and not even discount airlines are immune.
The flood of bad news in the past week highlights how terrible things are economically for airlines. Last week saw UAL Corp.'s United Airlines and US Airways Group Inc. report combined third-quarter losses of more than half a billion dollars. Delta Air Lines, which itself had losses of more than half a billion dollars, dodged a date with a bankruptcy judge, at least for now. Discount airlines like America West Holdings Corp. and AirTran Holdings Inc. suffered losses, too, while earnings were down sharply at JetBlue Airways.
And the financial collapse of the low-cost carrier ATA Holdings Corp. -- which filed for bankruptcy protection from creditors -- shows that the weakest airlines, whether they are higher-cost carriers or discounters, are going to have a tough time anytime oil prices double.
WOEFUL WEEK
Bad news abounded for airlines last week
ATA: Filed for bankruptcy protection after cash was depleted by high fuel prices, high airplane lease rates and brutal fare competition
US Airways: Reported $232 million net loss for third quarter, more than twice as bad as a year earlier
United: Reported $274 million net loss for last three months and said it may violate loan covenants in fourth quarter
Delta: Tentative agreement with pilots' union to cut $1 billion in labor costs; still trying to renegotiate debt
JetBlue: Earnings tumbled 71% and carrier warned of loss coming in fourth quarter
Independence Air: Negotiating with lenders to preserve cash
What does it mean for travelers? Disruption likely lies ahead as airlines are forced this winter to rearrange, pull back or shut down. But airfare bargains will continue to abound.
Travelers are taking advantage of the tumult -- airlines filled nearly 80% of their seats in the third quarter, and still had losses of more than $1.2 billion. It's almost as if airlines are paying you to fly: Delta lost an average $23 on every passenger it flew.
That's because carriers had to cut prices so low to fill those seats. Price-cutting is great for travelers, but crippling for airlines, particularly with oil prices so high. But airlines have no one to blame but themselves for the oversupply of seats in the sky: Despite the glut, they keep adding more. In the third quarter, airlines added a huge amount of capacity -- equal to the main operations of US Airways, the seventh-largest airline in the U.S.
This trend is likely to continue. "There is no evidence that industry domestic capacity will do anything but rise in 2005," says JP Morgan analyst Jamie Baker .
Big airlines are trying to defend their markets and slow down the fast growth of the discounters by adding capacity and selling seats at cheap prices. In the third quarter, six higher-cost carriers -- AMR Corp.'s American, United, Delta, US Airways, Northwest Airlines Corp. and Continental Airlines Inc. -- boosted combined capacity by nearly 6%.
But the discounters are outpacing them. Armed with lots of deliveries of new aircraft, they are taking advantage of their rivals' financial weakness by expanding even faster. Five low-cost carriers -- America West, ATA, JetBlue, Southwest Airlines and Frontier Airlines -- added capacity twice as fast, at more than 12% combined compared with the same period of 2003.
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The added capacity sets a match to the bad fumes generated by high oil prices. It is a combustible mixture for any airline with fragile finances and shaky business plans. That was true for National Airlines, Midway Airlines and others in the aftermath of the 2001 terror attacks. It was also true in previous industry crises triggered by oil prices, war or high-profile crashes in the 1980s and 1990s. Low-cost startups were vulnerable if they had too much debt, too little cash and a weak customer base.
This time, there are some discounters with deep pockets and strong markets. The result will be that there will be consolidation among discounters just as with full-service airlines. Stronger low-cost competitors -- Southwest, AirTran, JetBlue, America West -- are already trying to pick up pieces from the weaker players.
ATA, saddled with expensive aircraft leases and little cash, is abandoning its four-year-old operation at Chicago's Midway Airport. But that doesn't mean Chicago will see any diminution of discount-airline service. A battle for Midway looms.
ATA has a tentative deal to sell assets to AirTran. But Southwest, the largest airline at Midway, plans a major expansion from its existing 19 gates starting in January, and says it wants some of ATA's 14 gates, too. And America West also has its eye on a hub in Chicago. Midway's gates are controlled by the city of Chicago, which likely will decide who gets to expand there, not ATA's bankruptcy proceeding.
"Now we know there's going to be significant change in Chicago," says Southwest Chief Executive Gary Kelly. "We are going to grow in Chicago."
Southwest also wants more gates in Philadelphia, where it would expand if and when US Airways shrinks or shuts down.
Next year, Southwest will increase the size of its fleet by 29 planes with deliveries from Boeing Co. That means growth of about 10% next year. But if new opportunities arise, the airline could double that to 58 additional planes, Mr. Kelly says. Southwest could fly some of ATA's 737-800s if they became available, or it could grab some of US Airway's 737-300s.
In addition to ATA's bankruptcy, Johnny-come-lately Independence Air is struggling, and big debt payments due in January have raised bankruptcy warnings among analysts. Both have troubled business plans. ATA ordered a fleet of Boeing 737-800 and Boeing 757 jets -- bigger than what has been the optimal size for discounters. Independence is trying to be a discounter with regional jets, and has been slow to even fill those seats.
It isn't enough to be a "discount airline." You need good markets, a smart plan and solid finances. For higher-cost carriers, it isn't enough to extract labor concessions, especially if they still leave you with higher costs and less-efficient operations. Big losses are expected into next year. As Mr. Kelly says, "Something has got to give."
美国折扣航空公司岌岌可危
时运不济，美国最弱小的航空公司已经岌岌可危，折扣运营商恐怕也难逃厄运。
上周，航空业的坏消息接二连三，窘迫境况不言自明。UAL Corp.旗下联合航空公司(United Airlines)和US Airways Group Inc.双双公布第三财季亏损，合计亏损额超过5亿美元。自身亏损已逾5亿美元的达美航空(Delta Air Lines)与破产保护的厄运而过。America West Holdings Corp.和AirTran Holdings Inc.等折扣运营商正在蒙受巨额亏损，JetBlue Airways的利润也每况愈下。
低成本运营商ATA Holdings Corp.申请破产保护的消息更加凸显出无论成本高低，美国实力最单薄的航空公司正在随油价的高涨而面临严峻考验。
那么这对旅客将意味著什么？随著今冬许多航空公司被迫重组、节支和削减业务，航班安排可能会受到干扰。但廉价票将继续随处可见。
这种混乱局面或许会给旅客带来益处──航空公司在运载率接近80%的情况下仍然面临巨额亏损，第三季度的亏损额超过12亿美元。航空公司好像在付钱请你坐飞机：达美航空每乘客平均亏损23美元。
为了填满座位，很多运营商不得不降低价格。降价当然会受到旅客欢迎，但也给航空公司带来沉重负担，特别是在当前油价高企的情况下。
然而航空公司要怪也只能怪它们提供了过多的座位：尽管市场已经接近饱和，它们却仍在增加运能。第三季度，美国航空公司增加的运能已相当于第七大航空公司US Airways主要业务的运能。
这种趋势可能还会持续下去。JP摩根(JP Morgan)的分析师贝克(Jamie Baker)表示，航空业并无任何削减运能的迹象，2005年的运能可能还会增加。
大型航空公司正试图通过增加运能和削减价格来捍卫市场份额，遏制折扣运营商的快速增长。第三季度，6家高成本运营商──AMR Corp.旗下的美利坚航空(American Airlines)、联合航空、达美航空、US Airways、西北航空(Northwest Airlines Corp.)和大陆航空(Continental Airlines Inc.)──合计将运载能力扩大了近6%。
而折扣运营商也不甘示弱。随著大量新飞机交付使用，他们利用竞争对手财务状况不佳的时机奋力扩充机队。5家低成本运营商──America West、ATA、JetBlue、西南航空(Southwest Airlines)和Frontier Airlines──合计将运能扩大了12%，达到大型航空公司增长比例的两倍。
在油价高涨的环境下，运能的增加无异于雪上加霜。资金紧张、管理不善的公司必然陷入窘境。911事件后National Airlines、Midway Airlines等诸多公司的惨状已经可见一斑。油价、战争以及八、九十年代大公司破产所带来的行业危机更是有目共睹。后起的一些低成本公司，如果它们的债务过多、现金过于紧张或者客户基础不够雄厚，厄运也在所难免。
当然，这一次，有一些资金雄厚、市场地位稳固的折扣运营商的存在，结果可能是折扣运营商兴起整合浪潮，正如全方位大型运营商的整合一样。实力雄厚的低成本运营商──西南航空、AirTran、JetBlue、America West──正摩拳擦掌，挖掘弱小竞争对手的投资价值。
囊中羞涩又背负昂贵租赁合约的ATA打算放弃其运营4年之久的芝加哥Midway机场业务。但这并不意味著折扣航空服务将在芝加哥销声匿迹。争夺Midway的战争已经打响。
ATA与AirTran就出售资产展开了试探性谈判。Midway最大的航空公司西南航空也开始跃跃欲试，公司计划从1月份起大幅增加登机口数量（公司现有登机口19个），并表示也希望收购ATA的14个登机口。与此同时，America West也已经瞄准了芝加哥这块宝地。当然，Midway的登机口由芝加哥政府所控，最终归属还要由芝加哥定夺，而并非受ATA破产程序左右。
西南航空首席执行长凯利(Gary Kelly)称，“芝加哥将发生翻天覆地的变化，我们要在芝加哥成长起来。”
此外西南航空还瞄准了费城的很多登机口，如果US Airways业务萎缩或者破产，西南航空就有望在这里发展壮大。
明年，西南航空将在其机队中增加29架飞机，均为波音(Boeing)飞机。这也就意味著公司明年将把机队扩大10%。但凯利表示，如果发现新的机会，扩充数量还可能再翻一倍，达到58架。他说，如果可能的话，西南航空将收购ATA的几架737-800飞机，或者收购US Airway的部分737-300飞机。
除ATA濒临破产外，新兴的Independence Air也已四面楚歌，明年1月份将到期的巨额债务令很多分析师对其发出了破产警告。两家公司的业务计划均不尽合理。ATA订购了多架737-800飞机和波音757喷气式飞机，远远超出折扣运营商的理想规模。Independence虽然试图成为支线飞机市场的折扣运营商，但即使是在努力填满座位方面也进展缓慢。
它还不足以成为“折扣运营商”。你需要良好的市场，周密的计划，以及稳定的财务状况。至于成为高成本运营商，它又不足以达成劳工妥协，特别是如果劳工成本成为你的沉重负担、并且业务运营低效的话。该公司明年很可能出现巨额亏损，正如凯利所说，公司需要拿出点儿有效的整改措施。
