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 impact of slowdown could be delayed to 2009.
? FAA investigations into major US airlines maintenance practices regarding AD’s were heightened as a result of the increased scrutiny following lapses of compliance.
ANALYSIS
? 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.
Downturn in Economy
? Profitability for the airline industry adjusted to $4.5B
? US airlines are most exposed to the risks in the business environment.
? US airlines forecast cut to $1.8B net profit in 2008.
? This could turn into a net loss if the economic environment deteriorates further.
If central banks fail ...