Business Travel News - July 28, 2008 - (Page 3)

NEWS Industry Sees Air Bankruptcies, Liquidations On The Horizon BY JAY BOEHMER domestic industry’s current path, With fuel maintaining historic the question is not whether more highs and an emerging consensus carriers will go away, but which ones that the airline business is unsus- and when (see story, page 36). tainable at its current size, the inFitch Ratings this month said dustry is awaiting the next shoe to U.S.-based legacy carriers “will expedrop in the form of bankruptcies or rience rapid erosion of cash levels liquidations. in the post-Labor Day period. This Though airline analysts, credit rat- erosion could threaten their survival ing firms and reprefuel trends For the latest breaking news, if adverseand multiple sentatives from an avicontinue, see btnonline.com/bn ation bankruptcy bankruptcies and liqadvisory firm said major U.S. carri- uidations are increasingly likely lookers have enough cash and assets to ing ahead to 2009.” In a research note published late carry them through 2008, next year is likely to bring capacity reductions last month, JPMorgan airline anain a less voluntary form than the lyst Jamie Baker said major carrier ones implemented this year, as bankruptcy filings this year are unsmaller carriers go under and ma- likely, as many carriers have “been jors struggle with solvency. On the there, done that” and “cash is not CONTENTS July 28, 2008 Issue 661 Vol. 25, No. 10 ROLE CALL P. 18 Inside Track: Rearden Commerce buys ExpenseWire . . 4 Profile: Getting the Best Buy for hotel rooms . . . . . . . . . . 6 IMF’S Caro Cook Newsmaker: JPMorgan taps Amex’s Vergara . . . . . . 8 BTN Research: 25th Annual Salary Survey . . . . . . . 16 Forum: Perspectives on fuel-cost future shock . . . . . . 32 Aviation: EU prepares to cap airline emissions . . . . 38 PROCTER & GAMBLE’S Lodging: Hilton to raise use of home res agents. . . . 40 Debbie Gittinger Ground Transportation: Hertz cuts refueling fees. . . 48 Meetings Today: Best Meetings Practitioners 2008 . . 50 Travel Management: FCm names new N.A. head. . . 54 THOMSON’S Expense/Payment: Amex sees gains in Europe . . . 56 Cindy Heston Destinations: Conf. centers eye Asia; LAX renovates. . 57 Executive Dashboard: Hoteliers delay negotiations . . 60 Washington Wire: TSA triples passenger X-rays . . 66 FIND DAILY NEWS UPDATES AND MORE AT WWW.BTNONLINE.COM yet in crisis,” noting that most large carriers in the past have not filed until cash dips below 15 percent of revenue for the 12 preceding months. However, several triggers could change that scenario, Baker said, including sustained oil prices of $150 a barrel and a greater than anticipated hit on air travel demand. Of the nation’s largest carriers, Baker laid out those with the highest risk of filing for Chapter 11, with US Airways and American leading the pack, followed by United, Northwest and JetBlue. Southwest, Alaska, Delta and Continental carry the least Chapter 11 risk, in that order, Baker said. Despite the risk assessment, Baker outlined a number of levers each carrier could pull to gain additional liquidity, ranging from a large-scale sale of frequent flyer miles, to the sale of subsidiaries, aircraft and airport slots, among others. During a conference call with airline investors this month arranged ALIXPARTNERS’ PHILIP TOY Majors can carry until 2009. by UBS airline analyst Kevin Crissey, managing director of bankruptcy advisory firm AlixPartners’ aviation and aerospace practice Philip Toy outlined the best-case scenario for the majors: fuel prices stay high long enough to eliminate some discount carrier competition, taking away their capacity and pricing pressure. “Then there’s a steep drop-off in fuel prices and the economy picks up as well sometime in 2009,” Toy said. “Most majors have enough cash and liquidity to carry into 2009 on some level. If demand picked up and fuel prices dropped off, it could be a good outcome for major airlines.” Toy also gave the most likely scenario, which hinges on fuel maintaining its current level: “We would see some filings from first the discount carriers, and then we would see some of the legacy carriers—although the timing is very open on when that would happen,” he said. “We hope in that base-case scenario that enough capacity is taken out of Continued on page 14 ON THE RECORD Corporate America has minds like elephants.We don’t forget the huge hotel premiums of the last three years. Now, it’s in our court. NBTA PRESIDENT KEVIN MAGUIRE, PAGE 4 CAPITAL ONE’S Tamara Jones BTN (USPS 0728-870, ISSN 8750-3670) is published monthly, except semi-monthly in March, May, July, September and October by Nielsen Business Media Inc.,770 Broadway,New York,NY 10003,tel.646-654-5000,and is distributed free of charge to qualified corporate travel buyers and travel agents specializing in business travel in the United States and Canada. The cost of a subscription to non-qualified subscribers is $119 in the U.S.; $135 in Canada; $135 in Mexico and Central America; $200 in South America and Europe; and $200 in Asia,Africa and Australia; payable in advance in U.S. dollars. Registered for GST as Nielsen Business Media Inc. USA GST No. 124513185. Periodicals postage paid at New York, NY, and additional mailing offices. Canada Post Publications Mail Agreement No.40031729.Return Undeliverable Canadian Addresses to:DHL Global Mail 4960-2 Walker Road,Windsor,ON N9A 6J3. Business Travel News is a trademark owned exclusively by Nielsen Business Media Inc.Copyright © 2008 by Nielsen Business Media Inc.Reproduction of this magazine,in whole or in part,is prohibited unless authorized by the publisher.Editorial and advertising offices:770 Broadway,New York,NY 10003.For address changes (please include mailing label), single copy sales ($10 per issue including shipping and handling, prepayment required), subscription information, and other customer service inquiries,write to Business Travel News,P.O.Box 1187,Skokie,IL 60076,or call 847-647-7987 outside the U.S. POSTMASTER: Send changes of address to BTN, P.O. Box 1187, Skokie, IL 60076. Printed in the USA. Business Travel News www.BTNonline.com Monday, July 28, 2008 3 http://btnonline.com/bn http://www.koreanair.com http://WWW.BTNONLINE.COM http://www.koreanair.com http://www.BTNonline.com

Table of Contents for the Digital Edition of Business Travel News - July 28, 2008

Business Travel News - July 28, 2008
Contents
Inside Track
Profile
Newsmaker
BTN Research
Forum
Aviation
Lodging
Ground Transportation
Meetings Today
Travel Management
Expense/Payment
Destinations
Executive Dashboard
Washington Wire

Business Travel News - July 28, 2008