American Airlines Goes Bankrupt, Signaling End of an Era

'Hub-and-spoke’ legacy carrier model seems doomed for good

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Granted, the loans extended after 9/11 totaled less than $2 billion by the end of 2002. That’s a drop in the bucket compared with the mammoth bank bailout. It’s also worth noting that United Airlines was denied financing by the ATSB and forced into bankruptcy just a few days later.

But it all begs the question: What is going to become of our airline industry if, based on the current model, the legacy carriers simply can’t turn a profit? Why is it fair that they get to keep declaring bankruptcy and maintain their big reach when it seems like it’s only a matter of time before we see another Chapter 11 filing?

It’s not like airlines are simply a bad business. Southwest Airlines (NYSE:LUV) continues to thrive, with the low-cost leader posting annual profits every year since 2007 despite volatile fuel prices and the severe economic downturn. Regional carrier Alaska Airlines (NYSE:ALK) hasn’t had a quarterly loss since early 2009 and is soundly profitable. There obviously are well-run airlines out there.

Perhaps there will be even more consolidation among the legacy carriers. Or perhaps Southwest or another up-and-comer will rise to rival the reach of these older brands.

Whatever the case, the old guard of the U.S. airline industry appears to be slowly dying. Aside from AMR Corp. and other airlines developing a fleet of flying cars or teleportation devices, it’s hard to imagine how they will ever return to dominance.

Jeff Reeves is the editor of InvestorPlace.com. Write him at editor@investorplace.com, follow him on Twitter via @JeffReevesIP and become a fan of InvestorPlace on Facebook. As of this writing, he did not own a position in any of the aforementioned stocks.


Article printed from InvestorPlace Media, http://investorplace.com/2011/11/american-airlines-amr-corp-chapter-11-bankruptcy/.

©2014 InvestorPlace Media, LLC

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