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How Is the Economic Downturn Affecting the Airline Industry?

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EXECUTIVE SUMMARY

 Stagflation in US economy threatens outlook for the airline industry profitability. US airlines forecasting Q108 losses citing high fuel costs and a potential economic slowdown.

 Other regions of the world will expand such as Asia, Middle East and Latin America.

 Slowdown has already affected some US small-mid cap carriers with the recent onslaught of bankruptcies.

 US majors are better armed to combating the effects of the sharp increase in jet fuel. Cost reduction initiatives have been announced.

 Slowdown in the US economy is expected to accelerate consolidation talks between the majors.

 Cash cushions at most US majors from a profitable 2007 will help them in the short-term. Financial …show more content…

Merged airlines will produce a combined cash balance of $7 billion upon consummation, the best cost structure and debt-to-income ratio in the industry, and access to financial markets.
 The combined airline’s fleet will comprise 800 mainline aircraft and 600 regional aircraft. It will be the largest operator of A330s, B757s and B767s, a balance of Airbus and Boeing widebodies that is expected to continue going forward. Additional aircraft orders will not be made unless it makes fiscal sense and the merger is “about addition, not subtraction” and “is not predicated” on hub closures, involuntary furloughs or big capacity reductions.

 Cash cushions at most US majors from a profitable 2007 will help them in the short-term. Financial impact of slowdown could be delayed to 2009.

Cash cushion helps big airlines for now

 The nation’s biggest airlines have saved some $19B in cash as of the

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