U.S. Airline Industry Faces 'Unpleasant Long-Term Scenario'

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Last updated at: (Beijing Time) Tuesday, April 02, 2002

U.S. Airline Industry Faces 'Unpleasant Long-Term Scenario'

There is no room for further financial setbacks in the U.S. airline industry and some air carriers may not survive the year, Standard & Poor's said Monday.

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There is no room for further financial setbacks in the U.S. airline industry and some air carriers may not survive the year, Standard & Poor's said Monday.

In its forecast for the industry, the ratings agency described an unpleasant long-term scenario for most of U.S. air carriers, despite modest increases in passenger traffic in recent months, lower fuel prices and cost savings now being realized from large layoffs announced last fall.

September 11 aftermath, weak economy and airport security hurdles keep great pressure on airlines, the agency said. Only regional carriers, with their fleets of new regional jets, show promise for near-term expansion, said S&P whose equity analysts produce airline studies every six months.

Last year saw the worst losses in airline history, S&P said, and many U.S. airlines took on large amounts of debt to keep flying. As a result, debt-to-capital ratios are at "unhealthy levels."

"Although passenger traffic has been slowly increasing since flights resumed after September 11," the agency said, "we don't expect the majors, apart from Southwest who has remained profitable, to return to health before 2003."

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