Experts: Size, limited assets make US Airways vulnerable
— -- When their efforts to buy Delta Air Lines failed 14 months ago, US Airways executives returned their attention to a long list of challenges, from union negotiations to a new reservations system.
Those may turn out to be minor compared with the looming financial crisis the Tempe-based airline faces as it moves on after the collapse of merger talks with United Airlines last week.
An unprecedented spike in oil prices, combined with a weak economy, threatens to send several carriers to the brink of bankruptcy or liquidation by the end of this year or early next year, analysts say. advertisement
US Airways is seen as among the most vulnerable of the major airlines, given its relatively small size, route network and limited assets to sell to raise cash.
One analyst last week listed US Airways among three carriers with "very large" losses forecast for this year and next.
Last month, another rated US Airways as having the highest bankruptcy risk among the major airlines.
Chief Executive Officer Doug Parker saw a merger with United as both airlines' best chance of weathering the storm, given the flight cutbacks, cost cutting and new sales opportunities that come by combining two airlines.
US Airways and America West saw early financial success and a soaring stock price after their 2005 merger.
With the United deal out as an option and no other merger talks on the horizon, US Airways now must move quickly to prepare for the unforeseen reality of exorbitant fuel prices.
"They need to batten down the hatches and look to do some of the same things everyone else is doing," said Jim Corridore, airline-equity analyst for ratings agency Standard & Poor's.
American, for example, recently announced that it plans to cut seat capacity by 11 to 12% and ground planes after the busy summer travel season, a move likely to impact thousands of employees. It is also the first airline to start charging for the first checked bag, effective June 15.
Hardly a day goes by without an airline's announcing a cost-cutting or money-raising move to offset the staggering impact of fuel.
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