Airlines are going out of business as fast as a Boeing 737 burns jet fuel. What gives? Here’s a quick recap of the body count. Between March 31 and April 4, three air carriers went belly-up: 60-year-old Honolulu-based Aloha Airlines, 35-year-old Indianapolis-based ATA, and Columbus-based Skybus Airlines which just began service last May. Then on April 10, 14-year-old Denver-based Frontier Airlines filed for bankruptcy but said it would continue normal operations. And Minnesota-based charter airline Champion Air has said it will stop flying by May 31.
Each company cites a different cause for its predicament. Aloha had just declared bankruptcy a second time in March, two years after emerging from its first bout with Chapter 11. Airline CEO David Banmiller said that rising fuel costs and intense competition for Hawaii vacationers had proved too insurmountable an obstacle. Meanwhile, ATA lost “a key contract for [its] military charter business,” according to an article posted at CNNMoney.com. Low-cost carrier Skybus blames high fuel prices and a weakened US economy. Frontier Airlines is pointing the finger at credit card processor First Data, a company that is holding back the proceeds of ticket sales and creating a cash flow problem.
The common thread in these stories — bankruptcy — is of course not so remarkable for a US-based airline. Filing for bankruptcy has proved a powerful weapon for keeping labor unions from claiming any part of the enormous retirement packages that so many CEOs have walked away with at the end of their airline careers. Rather, what is noteworthy is the cause for the current spate of Chapter 11 filings. These airlines lack the deep-pocketed cash reserves that a Northwest or a Southwest has managed to hoard.
Will low-cost carrier Frontier survive bankruptcy, as many larger, so-called legacy airlines have? We’ll see.




