Gadling’s airline hit list: five airlines to watch this summer

With all of the trouble swirling around the airline industry it’s hard not to think about this summer and more problems that could occur. Summertime is traditionally a busy time of year, with travel prices and oil going up as vacationers hit the road. This year is a little different though. More Americans are staying home because they can’t afford to take that summer vacation to Disney World and the cost of operating an airplane is at an all time high. We suggest in an earlier article that this combination could spell disaster for more than one airline.

I’m not the only speculator on the obituaries — Morningstar released a financial report on the airlines earlier this month that rated the liquidity and debt coverage of some of the major carriers. What they found was that Southwest was the only airline in a decent position, a few other carriers were squabbling along in second place and there were a lot of airlines in serious financial trouble this summer.

Business Travel Commission and AirlineForecasts issued another doomsday paper last week called the Airline Crisis Report, where they look at the earnings of the top ten carriers in the United States. The only company in the black? You guessed it.

So we’ve put all of the data together and mixed in a fair amount of “gut feeling” to make Gadling’s Hitlist: 5 Airlines to Watch this Summer. Expect to hear about these airlines in the news, woeing about fuel prices and cutting about service and maybe even exploring the “B” word: bankruptcy.

  1. Frontier Denver based Frontier Airlines declared bankruptcy earlier this year because their credit company started taking a larger cut out of their transactions. All this has potential passengers afraid of another Skybus incident where they might get trapped at their destination, so my bet is loads and profit are down even further. Today the struggling airline released a report saying they would take a $59.4M loss this year, their largest deficit ever.
  2. L’avion – Never heard of L’avion? Most people haven’t. One of the last of the business-class-only carriers around town is struggling to keep it’s head above water as OpenSkies is about to jump into the USA-Paris market this month. If we’ve learned anything from Maxjet, Eos, or Silverjet, L’avion is up to bat next.
  3. US Airways – The above data seem to indicate that US Airways is in one of the worst situations among all carriers — among the most outstanding debt, lowest liquidity and lowest earnings in the market. Earlier this year they were rumored to be in talks with United to merge. Someone needs to bail them out, because they keep hemorrhaging cash and with a rating among the lowest on the Airline Quality Report, passengers need a boost in confidence.
  4. Spirit – Low Cost Carriers are among the first victims in a downturn, as Skybus already showed us. While Spirit has been around for a while, they may not have the customer or frequent flyer base to keep things going in sustained tight times. As MSNBC’s Chris Elliott pointed out last week, they’ve almost shut down their customer service, which can’t be a great sign of things to come.
  5. Mesa/Pinnacle – As small feeder airlines for the larger carriers, both Mesa and Pinnacle face the potential of being trimmed out as the giants cut costs. Just last week, Pinnacle was dropped as a feeder by Delta Airlines. Mesa, on the other hand, was rated among the lowest in both the Morningstar and AQR reports.

Think I’m full of crap? As I admitted before, much of these predictions are a mixture of speculation and data — these notes shouldn’t influence your portfolio investments or even your decision to book tickets. Let me know what your favorite airlines and predictions are below are and hold on for a little bit of turbulence this summer.