Plane issues

Chicago-based Fitch Ratings recently said the U.S. airline sector “remains fragile and highly sensitive to changes in air travel demand and the price of jet fuel.”

The comments were part of Fitch’s “Fall 2009 Airline Credit Navigator,” in which it was noted that “modest improvement” in revenue has reduced the risk for bankruptcy in 2010.

“The strength of a global economic recovery and the pace of improvement in high-fare business travel demand will be the driving forces influencing airline credit quality through the winter," Bill Warlick, senior director at Fitch, said in a statement. "Over the next economic cycle, sustained improvements in airline credit fundamentals will depend upon further progress toward industry consolidation, as this provides carriers with the best opportunity to generate pricing power."

OTHER FITCH NOTES
• All of the U.S. legacy carriers have seen their liquidity positions eroded materially as a result of almost two years of sustained operating pressure and constrained access to capital.

• Even if revenues continue their gradual firming trend through the period of seasonally weak demand extending into the winter, some airlines will face the risk that uncomfortably low cash balances in early 2010 will again force them to seek out emergency sources of capital.

• In addition, higher borrowing costs, persistently high leverage and chronically weak cash flow highlight the largely unsustainable nature of U.S. airline capital structures.

• Fitch-Rated U.S. airlines:
AMR Corp.: ‘CCC’
Continental Airlines, Inc.: ‘B-‘, Stable Outlook
Delta Air Lines, Inc.: ‘B-‘, Negative Outlook
JetBlue Airways Corp.: ‘B-‘, Negative Outlook
Southwest Airlines Co.: ‘BBB’, Negative Outlook
UAL Corp.: ‘CCC’
US Airways Group, Inc.: ‘CCC’