After the recent abrupt shutdowns of [% 2541751 | | Aloha %], [% 2544741 | | ATA %], [% 2546182 | | Skybus %], [% 2483837 | | Maxjet %], and [% 2556964 | | Eos %], and with [% 2549144 | | Frontier %] operating under protection of Chapter 11 bankruptcy, travel consumers are skittish
And they should be. As [% 2571061 | | discussed here %], the entire airline industry is vulnerable to the corrosive forces of rising fuel costs and falling demand. Some airlines, though, are in more precarious spots than others. And two developing situations bear particular scrutiny.
First, Silverjet. On Friday last week, the British all-business-class airline suspended trading of its stock on the London Stock Exchange. The move was made in response to the airline’s failure to receive a $5 million loan to shore up its deteriorating financial position. According to the company, “Silverjet’s working capital reserves are limited and advances under the Loan Facility are required as a matter of urgency.” One can’t help but be reminded of another all-business-class carrier, Maxjet, that halted trading of its shares on December 7, 2007, and ceased operations altogether later the same month.
There are also signs of trouble at the Mesa Air Group, a holding company for Mesa Airlines, go!, Air Midwest, and several commuter carriers operating as Delta Connection, United Express, and US Airways Express. In all, the company claims it operates “more than 1,100 daily departures to 184 cities in 45 states, the District of Columbia, Canada, the Bahamas and Mexico.”
Mesa faces challenges on several fronts.
The company has filed suit against Delta, claiming that Delta’s cancellation of Mesa’s contract to provide feeder service as Delta Connection was unjustified and could force Mesa into bankruptcy. Earlier this month, Mesa announced plans to [% 2567407 | | completely shutter %] its Air Midwest operation by June 30. Its go! subsidiary has struggled to make a profit and sparked a lawsuit with Hawaiian Airlines that ended with Mesa agreeing to pay $52.5 million. And on May 14, Mesa was forced to issue millions of new shares to pay off $37.8 million in senior convertible notes due in June.
While travelers can hope for the best, recent events suggest they should be prepared for the worst.