Financially stable airlines? How to choose?

[Lisa P]

Which airlines seem to be doing well, and may be less likely to fold in the coming months? It's uncomfortable to purchase airline tickets with the recent closings of some. NWA, AirTran, Delta and US Air have decent fares for a planned trip. Is this a concern on the horizon with any of them? Thanks for your insights!

[Icarus]

Stick with any of the majors, use credit cards for the purchase. That's about all you can do.

-David

[Carolinian]

NW has the best cash position of any of the majors, but its prospective takeover by mismanaged DL raises serious questions about the future. None of the majors are anywhere close to going belly up at present. In fact the huge losses just reported by DL and NW were phony ''blue smoke and mirrors'' politcking to try to ease the DL takeover of NW through the government. It was largely concocted by taking massive and arbitrary writeoffs of ''goodwill'', a non-cash balance sheet item. What sticks out like a sore thumb is that no other airline, not up for government approval of a takeover/merger took a similar writeoff of goodwill at that time, but these two took massive writeoffs in this category to manipulate paper losses into the stratosphere. There is just way too much flim-flam in this DL/NW deal.

[x3 skier]

If you are really worried, check the website of the carrier for their contract of carriage. Most majors have agreements with other majors that if something unforeseen happens, your ticket will be honored by another carrier. You could also get trip insurance as well but check the terms for what is covered.

That said, no major is close to going under and ceasing operations even if they have a do over bankruptcy (which is certainly possible for United).

If you get a ticket on a major, I would not worry.

Cheers

[x3 skier]

Originally Posted by Carolinian

It was largely concocted by taking massive and arbitrary writeoffs of ''goodwill'', a non-cash balance sheet item.

IIRC Goodwill is carried on the books to balance the amount you paid over what something is worth. You can either write it of over a period of years or in one year. It makes no difference as to the true financial health of the firm to anyone who can read a balance sheet, thus it has no real "Flim Flam" value to investors. Seems to me they were "Cleaning up the Balance sheets" no more, no less.

Cheers

[CapriciousC]

Of the four airlines you've listed, the only one that I would have any reservations about would be AirTran - I don't know that they're in any financial trouble, but they're the only one that I wouldn't consider a "major" airline.

[Carolinian]

Originally Posted by x3 skier

IIRC Goodwill is carried on the books to balance the amount you paid over what something is worth. You can either write it of over a period of years or in one year. It makes no difference as to the true financial health of the firm to anyone who can read a balance sheet, thus it has no real "Flim Flam" value to investors. Seems to me they were "Cleaning up the Balance sheets" no more, no less.

Cheers

Yes, investors know that. This scam was not targeted at investors but at regulators, politicians, and the public, who are less savvy on such things.

No other airline took a similar massive writeoff of goodwill, so this sticks out like a sore thumb.

[x3 skier]

Originally Posted by Carolinian

Yes, investors know that. This scam was not targeted at investors but at regulators, politicians, and the public, who are less savvy on such things.

No other airline took a similar massive writeoff of goodwill, so this sticks out like a sore thumb.

Can't speak for politicians or the public who have no say in the merger anyway (except to wring their hands) but I doubt the regulators are "less savvy" since this is accounting 101.

Cheers

[short]

Originally Posted by Carolinian

Yes, investors know that. This scam was not targeted at investors but at regulators, politicians, and the public, who are less savvy on such things.

No other airline took a similar massive writeoff of goodwill, so this sticks out like a sore thumb.

So is it more of a "scam" to have goodwill on the books (probobly from buying Republic in 1986 and/or the reorganization in 1989 or is it a "scam" to write the goodwill off and have this old stuff off your books.

Companies will soon be reporting their financials and results on fair value accounting. If you think this is confusing just wait until then.

Short

[short]

Originally Posted by short

So is it more of a "scam" to have goodwill on the books (probobly from buying Republic in 1986 and/or the reorganization in 1989 or is it a "scam" to write the goodwill off and have this old stuff off your books.

Companies will soon be reporting their financials and results on fair value accounting. If you think this is confusing just wait until then.

Short

Actually this likely is Fair Value requirement already being applied. While it might be useful in the merger it is required accounting practice.

Short

[dougp26364]

Originally Posted by CapriciousC

Of the four airlines you've listed, the only one that I would have any reservations about would be AirTran - I don't know that they're in any financial trouble, but they're the only one that I wouldn't consider a "major" airline.

Airtran was listed as one of two airlines that weren't in great financial positiions. Frontier was the other airline and it filed for Chapter 11 a couple of weeks ago.

[CapriciousC]

Originally Posted by dougp26364

Airtran was listed as one of two airlines that weren't in great financial positiions. Frontier was the other airline and it filed for Chapter 11 a couple of weeks ago.

Yeah, I was afraid that might be the case. I like AirTran - I've worked with them for years, but they always seem to have one foot on a banana peel, financially speaking.

[Lisa P]

This is just the kind of info I was hoping to see. Thanks very much to all of you, for your help.

[Carolinian]

Originally Posted by x3 skier

Can't speak for politicians or the public who have no say in the merger anyway (except to wring their hands) but I doubt the regulators are "less savvy" since this is accounting 101.

Cheers

The public can have a say by putting pressure on regulators and politicians, just as they did in the failed US/UA merger attempt. We need to do that since creating an oligopoly market through all of these mergers will be a horror story for consumers. We don't need to just wring our hands. We need to write regulators and politicians. Defeatism was not the best approach in the US/UA situation and it is not today either.

Politicians could adopt some ''poison pill'' legislation that would hold the mergered airlines feet to the fire on abuse of their resulting oligopoly position, and they need to do that anyway to protect consumers.

[Carolinian]

Originally Posted by short

So is it more of a "scam" to have goodwill on the books (probobly from buying Republic in 1986 and/or the reorganization in 1989 or is it a "scam" to write the goodwill off and have this old stuff off your books.

Companies will soon be reporting their financials and results on fair value accounting. If you think this is confusing just wait until then.

Short

Wrong. This ''goodwill'' was inserted into their balance sheets as they emerged from their recent bankruptcies. If writing it off was really something required or even justified by accounting requirements, then it is exceedingly odd that other airlines did NOT do the same thing at the same time. That's the big red flag that this manuever simply smells to high heaven.