It’s a bit difficult to keep up with the different perspectives regarding the airline business these days.
On one hand, this NY Sunday Times article laments just how close some of the major airline companies are to breaking even on an operations basis. It is perhaps the best reflection of the state of the airline industry that breaking even on an operational basis is viewed as a breakthrough achievement for many airlines.
On the other hand, this Wall Street Journal ($) article on Monday reports that Northwest Airlines appears headed toward chapter 11. The company’s stock has lost 42% of its value this year and its largest individual shareholder is bailing out. Rating agencies recently downgraded the company’s senior unsecured debt to junk while citing unsustainably high labor costs and pension-plan obligations.
Professor Ribstein continues to tout the right idea for beginning to solve the financial problems of the airline industry, but it remains difficult to put an airline company out of its misery.