ATA Airlines filed for bankruptcy on Tuesday, and two more American carriers – Delta Air Lines and Independence Air – are within days of filing for bankruptcy protection, according to published reports in the past week.
That’s bad news for the Boeing Co., which has close to $4 billion worth of airplanes to deliver to Delta and ATA.
But there is a glimmer of hope for new jet orders from overseas.
U.S. airlines haven’t had much good news the last few weeks. Last week, Delta, American, Northwest and United airlines all reported multimillion-dollar losses for the quarter, as soaring oil prices pushed their costs up while competition from low-cost carriers forced them to keep fares low.
US Airways – already in bankruptcy, for the second time since 2002 – got a bit of good news this week, when pilots agreed to 18 percent wage cuts, which are expected to save the airline $300 million a year. But last week it warned bankruptcy courts that it could face a crisis early in 2005 that could trigger “a massive downsizing, layoffs, asset sales and/or orderly shutdown of the airlines operations,” Aviation Week reported.
Delta is perhaps in the worst shape, and it represents the biggest risk for Boeing. It’s looking for $1 billion worth of concessions from its unionized pilots, and it’s also trying to renegotiate terms on a couple of billion dollars of debt it owes creditors. If it should file for bankruptcy, it could rework the terms of its orders for 66 Boeing jets, Crain’s Chicago Business noted.
Delta ordered 61 Boeing 737s and five 777s. It’s already pushed back delivery dates on almost all of those planes.
The other problem is ATA. The Indianapolis-based airline appointed a “chief restructuring officer” on Monday, then filed for Chapter 11 on Tuesday, saying it had assets of $745.1 million and debts of $940.5 million.
Part of that debt is money it owes Boeing for seven 737s it has on order.
The silver lining in all this is that the planes Delta and ATA have on order – 737s and 777s – are Boeing’s most popular models, so if necessary, the company will be able to find other buyers, analyst Richard Aboulafia told Crain’s.
But “there’s too much softness in backlog,” he said. That doesn’t bode well for an industrywide recovery.
Yet, not all the news is bad.
This week, The Australian newspaper reported that Qantas is in the market for about $4 billion worth of airplanes it needs to replace older 747s. It’s looking at buying 20 planes, either 777s or Airbus A340s, The Australian reported. It will need them starting in 2008, and could make a decision on what to order as soon as May.
If Qantas goes with Boeing planes, it most likely will order 350-seat 777-300ERs, the newspaper said. But it will consider the new superlong-range 777-200LR, which will have a range of more than 10,000 miles.
The first 777-200LR is moving through Boeing’s Everett factory now.
Boeing also is in talks with Angola’s national airline on a deal for six 737s and three 777s, according to newspapers in South Africa.
Talks are ongoing with AirAsia, a startup carrier in Singapore, which could take as many as 80 737s, or Airbus A319s or A320s. And Boeing officials say they expect to announce more 7E7 orders between now and thew end of the year.
Boeing will hold a ceremony Thursday in Renton to mark the completion of its last 757. About 5,000 employees and guests are expected. The plane – the 1,050th 757 Boeing has built – will be delivered to Shanghai Airlines.
None of the mechanics or engineers working on the 757 line are being laid off, a spokeswoman said. A number have been transferred to Everett.
Reporter Bryan Corliss: 425-339-3454 or corliss@heraldnet.com.
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