Eos was an improbably candidate for success in the airline industry. It flew one route, from New York's JFK to London. It was an all-business-class carrier.
Now, Eos is bankrupt. Having only one route, added to the rising price of jet fuel, cut the carrier down.
According to the AP, "The company, based in Purchase, N.Y., said it intended to eliminate most of its work force."
The news raises the question, once again, whether small and large airlines alike can make it though the current increase in fuel prices and a recession without having to file for Chapter 11. It was only four years ago that most U.S. carriers had to seek protection in the courts. AMR (NYSE: AMR) was one exception. That hurts it now because it did not use bankruptcy to cut its debt and the costs of its workforce. That may make it the most likely candidate of any American carrier to hit the air pocket of insolvency.
The oil price crisis my be so bad that, coupled with falling passenger revenue in a sharp and prolonged downturn, even mergers like the one planned by Delta (NYSE: DAL) and Northwest (NYSE: NWA) will not save them.
That will leave the banks, who hold most of the debt on airline balance sheets, holding the bag.
Douglas A. McIntyre is an editor at 247wallst.com.
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Reader Comments (Page 1 of 1)
4-27-2008 @ 7:58PM
Jerry Waller said...
And Banks know how to run airlines? I don't think so. We seem to be going after the symptoms of the increased fuel costs. Why don't we go after the root cause of the increased fuel costs? There is a root cause. Right Bush? How are you spending your profits? And Exxon is the most profitable company in the US?
4-28-2008 @ 10:59AM
Judy said...
And banks wanted to get into Real Estate. What in the world are we going to do if the banks sell, appraise, and handle the financing. We will all be paying dearing as we are now!!!!!!!!!! But even worse when they have their hands in all the works.