The one-two punch of Hurricane Katrina and oil prices briefly topping $70 a barrel is giving the beleaguered major airlines just what they...
ATLANTA — The one-two punch of Hurricane Katrina and oil prices briefly topping $70 a barrel is giving the beleaguered major airlines just what they don’t need as they approach a traditionally slow travel season and a few of them flirt with bankruptcy.
The storm forced the closure of several airports and caused scores of flight cancellations throughout the Gulf Coast region yesterday. It also caused a surge in oil prices, something the airlines have been battling for months with no end in sight.
The result could mean more pain for Delta Air Lines, a major carrier to the area affected by the hurricane, as it continues to try to avoid a Chapter 11 filing. Other airlines also could suffer. Like Delta, Northwest Airlines is in danger of bankruptcy.
“It’s not anything that anybody needs, frankly,” airline consultant Robert Mann said of the oil-price spike and the hurricane. “The airlines don’t need it. Consumers don’t need it.”
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Airline-industry expert Terry Trippler said he thinks the financial impact of the hurricane coupled with ever-rising oil prices could force the airlines to move more aggressively to raise ticket prices.
“They cannot continue to bleed red ink,” Trippler said. “Delta is going to get hurt a lot by this. Not just the oil prices, but the loss of flights they will experience over the next several days. It could be the one-two punch that makes the brain trust at Delta say it’s time to go into Chapter 11 reorganization.”
Two weeks ago, Delta warned its pilots union that the carrier’s cash reserves had fallen to the point where the company could seek to revise the agreement the two sides reached last year to avoid a bankruptcy filing at that time.
“I think they’re well below a minimum cash position where they should have filed already, but that’s just my opinion,” said Mann, an airline consultant at R.W. Mann & Co. in Port Washington, N.Y.
Airline analyst Joel Denney at Piper Jaffray in Minneapolis said Northwest’s situation is equally tenuous.
“One after the other there’s been enough things hitting that it continues to push them closer to the edge,” Denney said. “They just cannot stand a whole lot more.”
United Airlines and US Airways are already in bankruptcy. Filings by Delta and Northwest would leave American and Continental as the only major hub carriers not under Chapter 11 protection.
“Jet-fuel prices are crushing, and could prove to be a knock-out blow for some,” said John Heimlich of the Air Transport Association, an industry trade group, in a recent report on fuel prices.
Executives with American said they continue to closely monitor fuel prices.
“Each one of these shocks in oil prices further exacerbates the problems the industry is facing,” said Tim Wagner, a spokesman.
The hurricane signaled an ominous end to a summer travel season that has seen a strong rebound in travel. Traffic demand was high, with many airlines reporting record passenger loads in June and July.