Are American Airlines, Delta, United and U.S. Airways on the brink of financial ruin?

Question

I ask because of the rise in aeroplane fuel prices has caused these 4 'major' US airlines to lay off huge numbers of staff. I wondered if this could be the facade of a problem much more serious...

Answer 1

As a shareholder in Southwest Airlines I certainly hope so.  Yes, fuel prices have been a huge problem.  SWA also has a very aggressive hedging program that has helped them.

The various unions are another problem.  The always want more in good times, but are rarely ready to give up anything when the company is hemorrhaging cash.

That combination is a recipe for bankruptcy.  Several have declared it already, and mergers have been discussed and proposed.

Answer 2

Oil prices have dropped and share prices of the companies you listed have rebounded a bit. In the long run, higher fuel prices will cause consolidation in the industry (which is a form a ruin). These companies are at the mercy of fuel prices.