The Next Bailout? Airlines Fly Close to the Edge

Some people ask whether it's time for another bailout as airlines get desperate.

ByABC News
November 18, 2008, 12:10 PM

June 17, 2009 — -- Would you work for free?

That's what British Airways is asking its employees to do. Work for free. To be precise, the airline has requested that all its workers -- from pilots to management to mechanics -- do their jobs for up to four weeks without a paycheck. The CEO of British Airways says they need to do this because the airline is in "a fight for survival."

BA's employees are not happy. Understandable, but what a perfect example of what's happening throughout the airline industry. It's in trouble -- try $9 billion worth of trouble. That's the latest estimate of worldwide losses for the industry during this year alone. And that figure could go higher.

So it's not surprising that some people are saying, time for a bailout. With our tax money, of course. Well, is it time?

For more air travel news and insights, visit Rick's blog at farecompare.com

It kind of goes back to the ol' "too big to fail" argument. We recently heard that often enough during the travails of the Big Three automakers. And, yes, the airline industry is big. Not quite as big as the auto companies, which employ more than 1 million workers. But U.S. passenger airlines employed about 408,000 last year, down from more than 523,000 in the year 2000.

And, yes, the airlines are hurting. Internationally, the lucrative first- and business-class passengers -- the foundation of legacy airline profits -- plunged almost 20 percent in March, while profitable domestic business travelers had their wings clipped by recessionary budget cutbacks. Even worse is the number of airlines that have disappeared in the past 18 months: the New York Times puts that figure at an even 30. Goodbye, Aloha, goodbye, Eos, goodbye, ATA

For the most part, the oil crisis killed them. But if you think that's over, done, kaput, think again. Notice those prices creeping back up? Oil futures have been hovering above the $70 a barrel mark, double the price from early February of this year, despite the fact that some analysts say it's unjustified. (The funniest thing I've read on the subject comes from analyst Tom Kloza, quoted in the Los Angeles Times: "This rally [of oil prices] is like that stuff on Donald Trump's head. It's all froth. It's just not real." Now that's what I call a visual.)