Bailing Out
As airlines fail, analysts forecast more turbulence

By Adam Schreck Modified: April 9, 2008 at 12:43 am •  Published: April 9, 2008
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NEW YORK — Aloha Airlines, ATA, Skybus — one week, three airlines out of business. Add in soon-to-be-defunct Champion Air and December casualty MAXjet Airways, and last week's rapid-fire round of airline failures starts to look like an ominous trend.

Considering the heavy toll high fuel prices are taking on the industry, it's no surprise travelers, investors, airline employees — and bankruptcy lawyers — are wondering who might be next.

"When you have not just one, not just two, but three airlines that go bankrupt, you have people really sitting up and saying ‘what's going on?,'” said Vicki Corliss of InsureMyTrip.com, which has seen a jump in calls asking about coverage against going-out-of-business cancellations.

Industry observers are reluctant to predict which airline, if any, could next leave passengers stranded. But they agree that any further failures this year are unlikely to involve names atop most frequent-flier lists.

"The risk really is in some of the second-tier carriers that have less financial means than the major airlines,” said Kevin Mitchell, chairman of the Business Travel Coalition.

Regional carriers face pressure
One area of concern is regional airlines, which do most of their business feeding passengers in small markets to larger hubs on behalf of the bigger carriers. Their long-term contracts were always assumed to guarantee a certain level of business for years to come.

But with larger airlines under pressure to rein in expenses, even the extent of those promises is now in doubt.

"The major airlines are trying to cut costs as much as possible, and the regionals are one area where they can do that,” Standard & Poor's airline analyst Jim Corridore said.

‘Marginal carriers' could buckle
Last week, Mesa Air Group Inc., which provides regional service for US Airways, United Airlines and Delta Air Lines, said Delta planned to cancel a major contract-flying agreement worth $20 million a month, amid a disagreement over the number of flights completed.

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A passenger checks in at the Aloha Airlines counter March 30 at the Honolulu International Airport in Honolulu. Aloha, ATA, and Skybus went out of business in one week. Associated press

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