Fitch Sees "Multiple Bankruptcies" For U.S. Airlines
Reuters
NEW YORK (Reuters) - Rising energy prices and weak cash flow may result in "multiple bankruptcies and liquidation" for U.S. airlines in 2009, rating agency Fitch Ratings said on Tuesday.
The U.S. airline industry has reported uniformly weak earnings for the second quarter, and Fitch said it expects all major U.S. air carriers will experience "rapid erosion" of cash levels after the U.S. Labor Day holiday following the summer travel season.
"The U.S. industry's current structure is unsustainable in the current fuel environment," William Warlick, a senior director at Fitch, said in the report.
"The sheer magnitude of increasing energy prices and resulting weak cash flows make further industry consolidation unworkable," the report said. "Over the second half of 2008, more forced take-out of domestic capacity is likely as ongoing fuel cost pressures drain liquidity to distressed levels at all but the most cash-rich carriers."
U.S. President George Bush said on Tuesday there was no quick fix to lowering record oil prices and that oil in the U.S. Strategic Petroleum Reserve should be saved for supply emergencies.
Oil dropped by more than $9 a barrel on Tuesday, the largest drop in dollar terms in 17 years, on concerns that the economic health of the United States may hurt demand.
(Reporting by Walden Siew; Editing by Leslie Adler)
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