US airlines

By THIS IS MONEY
Updated:

 

The Daily Mail city team explains what is currently going on with US airlines.

What's up?

American carriers are about to embark on a domestic consolidation trip after years of being wrapped in cotton wool by the US authorities, which have propped up some with state-backed loans.

Washington has also encouraged a protectionist regime that has resisted foreign competition.

Why change now?

The 9/11 terrorist attacks on New York and Washington hit the whole airline industry hard, but particularly the US carriers.

Some, such as US Airways and Delta, were forced into Chapter 11 bankruptcy protection.

Airlines are volatile businesses, with high operating costs, and often have an intransigent, unionised workforce. Their financial struggle has ushered in a new realism - consolidate or die.

What next?

The second phase of the EU/US Open Skies agreement is due to be passed by 2010, which will bring down the barriers on global industry consolidation.

This would allow stronger European carriers like British Airways, Lufthansa and Air France-KLM, to take their pick of the financially weak, but potentially lucrative US network carriers.

This is another good reason why Delta and Northwest Airlines are set to be the first to embrace the self-help model of homegrown consolidation.

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