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boing71234567

Farewell to an airline...

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This really is a sad week - the sadest week I can rembember in aviation history. The US banks, after having lost billions on dirty highly speculative paper, now cut of the money on real buisiness, everybody expects more names to follow the next weeks.

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There is no gaz crisis. Could Lufthansa, Air France, British Airways, Swiss, or Iberia or even Ryanair make multi billion € (resp 100 million ) profits if there were a gaz crisis? The true name of the the crisis is Dollar crisis. The US no longer are the leading economy of the world.

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One of the things that's hitting the US airlines unfortunately is that the American airlines are used to paying insanely low prices for JetA1. They have, prior to this, been able to literally fly a B737 with ten passengers, because aviation in the US has cost so little compared to the rest of the world. Compared to especially Europe, the US airlines are massively inefficient. What's happening is that the most marginal of those operators, who could never have existed outside the US anyway, are collapsing.

It's very unfortunate for the companies, their employees and creditors, but as Burkhard says, it is primarily a United States issue. The rest of the world is being affected, but to nowhere near as great a degree.

Ian P.

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Yes. 5 years ago the Euro was 80 US cent and the gaz price 40$ - so 50€. Now we the Euro near 1,6$ and the gaz around 100$ - so around 65€. So the increase of gaz is moderate - 30% increase in 5 years are no crisis. The drop of the $ is the problem of US airlines, together with over reaction of the banks.

I see a lot of concentration going on. Delta and Northwest will fusion, AWE and US have already, and we will see what happens to United, Continental and American - I don't expect that there will be more than three large full service providers in the US in a few years, plus a hand full of point to point no service airlines, Southwest, Jetblue, Virgin America?.

The US, in order to get their economy up again, will need massive investments form the rest of the world - the current crisis just is because investors from Arabia and China, that is where the money is today, hesitate to invest in the US any longer for some reasons that have to do with politics. So the big question is IF the US will stick to their laws to limit foreign investments in airlines, while US investers hold many airlines abroad. If this gets releaxed, I see fusions of United and Lufhansa, Delta and Air France, etc. building entities out of the Alliances that can operate efficiently, depend only a little on currency fluctuations, etc.

But, forgive me this political side remark, if the US do not get the $ up again and continue to finance the Iraq war by inflation and a falling $, every American citizian will pay a very high prize for this.

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ive seen that. i was plane spotting at KBDL yesturday (real life) and they are starting to have northwest park were delta is. then of course 2 u.s. airways crj's took off in there new paint livery. in not sour what they are going to do with there northwest flight KBDL-EHAM and back. auctually flying jetblue from KSWF-KPBI on wednesday and on airtran airways from KPBI-KSWF. odd couple to fly on but it was cheap :lol:

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We could well start seeing European "partner carrier" airlines operating sectors inside the US soon... For instance rather than fly on an AAL jet, you'll see it being operated by a British Airways one, or KLM rather than Northwest, etc. It just depends on how far the US airline drawdown goes.

The Middle East is a growth area at the moment, with several airline startups that aren't doing too badly at all, thank you very much (e.g. Etihad) - plus India (Jet Airways) and a lot of others. I was told by someone who really ought to know that the purchase of BMI all fell through towards the end of last year and is unlikely to be on the table again in the near future, so it looks like the European airlines have stabilised again, it's now open season in North America instead.

Ian P.

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im pretty sure big companies like delta and american and united and northwest and us airways will not go bankrupt if that happens. virgin american is already starting to do what ian p said to north america.

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just read that silverjet might go this month. thats sad because mikaels silverjet might have to go to waist or be in the year 2006-2007 and not 2008 in my traffic.

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Damn, I really liked that Skybus paint... 8) :P

Also here in Montana, we lost Big Sky Airlines, the only service to the great north nowhere that is my current (not long to be) home. They flew B1900Ds, but at least they were not ready for painting in MTX yet.

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What a pity. The competition had become too strong in the US. When I look at the JFK schedules as example, there are sometimes 3 or 4 planes leaving for the same destination within a few minutes, just another airline. Most of these planes cannot be filled, so they get replaced by smaller ones which are not economical. This ends with an endless chain of CRJ amd ERJ instead of an A330 or B777 every two hours, which would have half the cost and half the fuel burn to the industry.

Every airline tries to optimize its own profit. It is typical for such optimisations that they are far away from a global optimum. To connect JFK and ORD, it would make much more sense to fly one widebody every hour or every 90 minutes, sell parts of it to the competing airlines, who are doing their individual services to the passengers in their section.

I follow the news on airliners.net currently, and there are much bigger names on the rumor list. Mesa as example, which would ground large parts of all xxx Express offers.

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noooooooooooooo. i am currently at KSWF with airtran in my sights and im waiting for jetblue to land. paid $2.00 just to get wifi here to post on this before i go. thank god im flying american airlines on the md80. :shock: they are going to inspect 300 planes! crazy. also PSA airlines just left and is now U.S. airlines. im going to go talk with the pilots, ill logg back on in florida.

thank you

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The far east I think is just overexpansion. Look at how many operators have sprung up in East and South East Asia over the last few years, and look at passenger growth - the two have never tallied. If you have seven airlines competing for the same passengers that two used to carry, how can that be financially viable?

The assumption in the aviation world at the moment is continued passenger growth. The global credit problems and Western European / North American housing market problems aren't exactly inciting more people spend more money travelling around the planet.

Ian P.

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Yes. And this will sort things out. Well managed airlines without debths will get even stronger. Badly managed airlines without enough own capital will go down. No rule will apply to Alitalia.

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No rule will apply to Alitalia.

Ow!!! :lol:

But oh, so true... Weren't KLM in talks about taking over Alitalia, with someone else, a while ago?

Ian P.

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AFR/KLM, they are one company quite a while now, had offered 1€ per share to take them. This deal would have included an agreement with the Alitalia unions to cut 2100 jobs, something they did not agree upon. So this failed a week ago. Today Air One again announced a bid for Alitalia, together with a group of unnamed Italian buisiness people. There are elections in Italy in a week, and expections are that the left chaotic government ( that favored the AFR/KLM takeover ) will be replaced by the known right chaotic figure who favors an all Italian solution.

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If my limited knowledge of US law is correct, I think you'll find Chapter 11 is Bankruptcy protection, preventing creditors from calling in all debts and killing the company. While yes, it is a very bad situation, not every company that enters Chapter 11 protection subsequently fails - indeed at least one major airline (was it Delta?) went into Chapter 11 after 2001 and has subsequently recovered to trade normally I believe, with the protection being removed once they were financially stable again.

Frontier would be a serious loss if they do go under though, they're not exactly a little carrier!

Ian P.

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It's not the customers that get a company out of the mire, though. If a company is still flying and offering competitive rates, although travellers will be more cautious about doing so, they will still fly with an airline in Chpt.11.

What Delta did was restructured from the ground up. They cut off the excesses, improved systems, reduced supply chains and unprofitable enterprises, it was the business that had to change. Passenger numbers, indeed, will have been significantly reduced due to the "will the airline still exist for my flight if I book a ticket in advance?" effect. I've been through two companies (non aviation) that have done the same in the UK without the benefit of bankruptcy protection and it isn't at all nice, you have to sack a lot of very capable people who have done nothing wrong, apart from anything else. However, I can well see Delta, who have already reorganised to operate in a way similar to other airlines outside the USA, weathering this storm better than competitors that haven't.

The sheer size of some carriers is often enough to maintain operational tempo and offset losses for short periods, but I don't think this will be a short period and I think that all US carriers, not just the majors or the tiny regional operators, will have to work hard to restructure and survive it.

Ian P.

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