Become a Travel Agent

Airline Bankruptcies, Fuel Prices and You
By: Tom Ogg

It shouldn’t come as a big surprise to anyone that the airlines are charging more for tickets, charging to check baggage, for food, for drinks, for premium seats in coach, to talk to a real person and for just about anything else they can think of.  In fact, U.S. Airlines will now start charging $2.00 for a soda eliminating the traditional complimentary beverage service that has been offered by airlines for many decades.

I suspect that they might even start charging to use the toilet on a flight, or for the use of seat cushions to sit on, or in case you need them, oxygen masks. They might even install a pay-per-sheet toilet paper dispenser. They could even start charging a “waiting fee” for using the terminal while waiting to board the flight or a “check-in” fee for checking in for the flight. The potential list goes on and on..

Of course, airline executives are expert at losing money. The industry as a whole ha yet to make its first cent of profit. Sure there have been some profitable years for the airlines, but from the day each airline first flew until today, the airline industry as a whole has not succeeded in retaining profitability in the long term.

Now with fuel prices so high, the airlines are really hurting. In fact, it is quite likely that the number of airlines may dwindle even further than it has. One website (247WallSt.com) has taken the time to evaluate the various airline’s financial positions and came up with the possibilities that large companies affected by the economy and fuel process might go bankrupt by the end of 2008. They feel that the entire airline sector is vulnerable as oil prices continue to rise and the economy worsens.

Understand that these are not predictions, but simple odds set by 247WallSt.com after reviewing the companies’ financial statements and the likelihood of continuing oil price hikes and a recessionary economy. So how are the airlines faring according to 247WallSt.com?

American Airlines (AMR): 247WallSt.com feels that there is a 50% chance of AMR filing for bankruptcy by the end of the year. They state huge operating losses, interest expense and long-term debt as the major reasons.

United Airlines (UAL): United faces a 25% chance of going bankrupt by the end of the year. Huge operating losses and increasing operating expenses have seen United’s stock tumble.

Northwest Airlines (NWA): Northwest has a 20% chance of filing for bankruptcy by the end of the year. Long-term debt and operating losses are creating pressure that could be partially relieved by a merger with Delta Airlines.

Delta Airlines (DAL): With only a 10% chance of going bankrupt by the end of the year, Delta would benefit from a Delta / Northwest merger by being able to cut capacity on competitive routes. However, rising fuel prices could cause havoc with Delta’s position and make their long-term debt more threatening.

Continental Airlines (CAL): Enjoying only a 4% chance of bankruptcy by the end of the year, Continental can still be dramatically affected by a recession and raising oil prices.

Travel agents need to pay attention to the airline’s financial viability, as they should consult their clients as to the realities of the effect of rising fuel cots and a recessionary economy. What can agents do to help their clients through the hard times?

… Keep on top of the airline’s financial positions. As Aloha Airlines, Frontier Airlines, ATA, Champion and Skybus have recently shown us, just because an airline has been in business for decades does not mean it will be in the future.

… Do not sell airlines that are in financial or operational chaos. This may sound obvious, but history shows that the worse a carrier’s financial position is, the more frantic they become. This desperation manifests itself into lower airares, give-a-way frequent flyer incentives and so. Before Hawaii Express went belly-up they were offering two free future round trip tickets to Hawaii for every one that was purchased. Of course, the future tickets were never redeemed.

… Always use your client’s credit card. Make sure that you client has checked with his or her credit card company about their policies regarding refunds in case of airline default and non-delivery of services.

… Remove yourself from legal responsibility by doing your agency disclosure in writing and use a specific “Notice of Agency Liability” agreement that eliminates you from accountability in case of airline bankruptcies and failure to provide service and make your clients agree to it in advance.

… Sell travel insurance and make sure the policy covers airline defaults. If an airline is specifically excluded from the coverage, do not sell that airline for any reason even if your client is begging you because the offer is too good to pass up.

To read the entire article written by 247WallSt.com visit the following link: http://www.247wallst.com/2008/06/the-247-wal-st.html.