Want more proof the airline industry is changing and that if these companies don’t restructure and move with the times then they’ll fail?
American Airlines filed for Chapter 11 bankruptcy protection overnight. Business file for Chapter 11 when they’re unable to service or pay its debt. The debtor then remains in contour of business operations while a reorganisation of its finances takes place.
American Airlines was the only major US carrier to avoid bankruptcy over the past 10 years. Hawaiian Airlines, United Airlines, US Airways, Northwest Airlines and Delta have all filed for Chapter 11 protection.
One of the reasons why many of these airlines found themselves in trouble, was because of mounting costs, mainly labour costs. (Is this starting to sound familiar?). But filing for bankruptcy protection mean that these companies were able to continue operating while restructuring their labour agreements. American Airlines was left with the highest labour costs in the US.
Similarly, Qantas is going through a similar issue which it revealed recently, will cost it $194million.
As a result, a number of brokers have downgraded their earnings estimates for the company, with RBS going hardest. It’s expecting a pre-tax profit of $352million down from $488million. On the upside, Qantas is still one of the world’s best performing airlines.
It’s own forecast has it posting an underlying profit for the half year of as much as $190million, at a time global airlines are either consolidating or floundering.
Also putting into context, while global airline shares have declined in the past year, since the end of September, American Airline shares have declined a further 45 per cent, while Qantas actually rose from a record low of $1.26 to $1.48 yesterday.