Published: 03 Apr 2008：The US airline industry is being tipped to lose more than $1 billion this year due to high fuel prices and likely fare cuts as a result of slackening demand, but liquidity for major airlines was sufficient for now, according to a report.
According to Reuters, Calyon Securities analyst Ray Neidl reportedly wrote, "Even in a lackluster economy with oil prices remaining high at around $100 per barrel, most of the publicly-traded network and low-cost carriers in the U.S. have enough liquidity on hand to survive until there is an economic rebound and/or oil prices subside."
He estimated that all airlines would survive 2008, but cash levels would be at alarming levels for a majority of carriers if current trends continue through 2009. Operating cash flow for airlines will remain positive for 2008, while free cash flow will be negative, Neidl said.
The report shared that Delta Air Lines Inc, Northwest Airlines Corp and Southwest Airlines Co are best positioned to weather the storm. Neidl added that Southwest has a large fuel-hedge position and low leverage. LCCs AirTran Holdings Inc and Frontier Airlines Holdings Inc are a cause for concern as their projected cash position will fall well below 10% of revenue by year-end.