Looking to Europe

20 October 2004 By Edward Hadas

Operating in bankruptcy, expensive pensions and high subsidies it sounds almost like Europe. But the US government is causing the trouble. The economics are not that complicated. Supply should be cut to match demand. The US government could help keep planes on the ground.

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Both Delta, the third largest US airline, and ATA, the 10th largest, are expected file for bankruptcy in the next few weeks. United, the second largest, and US Air, the seventh, are already flying bankrupt. With the expected new filings, almost half of the industry's capacity would be in the hands of bankrupt carriers.

The financial condition of American, the largest airline, is considered precarious.

In 2001, the six largest traditional airlines – American, United, Delta, Northwest, Continental and US Air – reported a combined operating loss of $7.8bn. That increased to $9.9bn in 2002 and fell to $5.3bn in 2003. After a dismal summer, usually the peak profit season, the industry's operating loss is expected to increase substantially in 2004.

Southwest Airlines, which is the only large and profitable carrier, had a $1.6bn profit over the three years.

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