US Airways is on the brink of joining old rivals like Eastern, TWA, Pan Am and Braniff in the airline afterlife, where the large collections of spare parts that once flew in tight formation have dispersed into wisps of memory.
The nation's seventh-largest airline is running low on cash as JetBlue and Southwest cannibalize its most profitable routes. Its largest lenders have placed claims on the carrier's remaining cash to minimize their exposure if the airline collapses.
Any one of those lenders could start a run on the bank by executing its capital calls. While US Air is widely expected to seek bankruptcy in mid-September, an earlier run on its cash could put it out of business before it has time to file for bankruptcy protection.
In fact, the airline "may be worth more dead than alive," an investment banker warned. That's because discount carriers are clamoring for more airplanes. Creditors and leaseholders could quickly "flip" US Air's aircraft, thus protecting their investment, the analyst noted in a somber report to US Air's pilots union.
Other "legacy carriers" -- United, American, Delta and Northwest -- face the same problems but are in slightly better condition, although United has been unable to find a way to emerge from bankruptcy.
A Traveler's Dilemma
What's a traveler to do?
It may sound cruel, but at this point in the involuntary restructuring of the airline business, it's best to avoid the major carriers if possible. Besides the danger that an airline will collapse without warning, carriers are trimming routes as quickly as possible; travelers with confirmed reservations will at best be inconvenienced if their flight is canceled.
At the very least, travelers should be sure to use a credit card -- not a debit card, check or cash -- when making reservations and purchasing tickets. This will prevent the loss of the ticket price but, of course, it won't guarantee alternative transportation.
Even this may not be as easy as it sounds. Although they do not discuss it publicly, credit card issuers are reluctant to carry large balances for airlines that may not be able to fly all their scheduled flights, since the credit card companies could wind up stuck with the tab.
Thus, credit card companies may mysteriously decline ticket purchases, even if the customer's credit is good, one travel insider said.
The discount airlines that are eating major carriers' lunch -- JetBlue, Southwest, ATA, AirTran, AmericaWest -- are in good financial condition and are moving quickly to add routes abandoned by the dinosaurs, so most travelers going from one major airport to another should have no problem booking flights.
Left Behind
The story is different for those in small cities like Ithaca, the upstate New York home of Cornell University. A few years ago, multiple carriers flew in and out of Ithaca, connecting it with hubs in New York, Pittsburgh and elsewhere. Today, only US Air is left and as it disassembles its Pittsburgh hub, it is eliminating all flights to Ithaca and a number of other small cities.
Small commuter airlines may eventually move in to serve such markets but until then, residents of smaller cities face a long drive or bus ride to a city that has air service.
