Washington >> American Airlines, Northwest Airlines Corp. and Frontier Airlines Inc. will be among the big winners as UAL Corp.'s United Airlines shrinks after a likely bankruptcy filing, analysts said. United rivals to benefit
American and other competing
United stock plunges
airlines could gain market share
UAL bankruptcy could hit DisneyBy John Hughes
Bloomberg NewsUnited's rivals will gain market share and may have an easier time raising ticket prices, which have fallen for much of the past two years. Shares of American parent AMR Corp., Northwest and Frontier gained after the carrier failed to win a $1.8 billion U.S. federal loan guarantee.
Competitors "are partying, the corks are popping" because United will need to cut capacity, said Steven Morrison, an economics professor at Northeastern University in Boston. With airlines having fewer seats to sell, "fares could go up a little," he said.
American and Northwest probably will be the top beneficiaries among major carriers because their route systems overlap the most with United's, Salomon Smith Barney analyst Brian Harris said in a report. American has a hub at O'Hare International Airport in Chicago, where United is based, and Northwest's hubs in Minneapolis and Detroit are alternatives for passengers flying to or through the Midwest.
J.P. Morgan Chase & Co. analyst Jamie Baker estimates that United may eliminate as much as 12 percent of its capacity.
AMR shares rose 54 cents, or 7.7 percent, to $7.58 in New York Stock Exchange composite trading and Northwest rose 37 cents, or 4.8 percent, to $8.01 on the Nasdaq stock market. Frontier, which is based at United's Denver hub, rose 11.3 percent and Alaska Air Group Inc., which competes with United on the West Coast, gained 7.7 percent.
Shares of United parent UAL plummeted 68 percent to $1 despite being halted from trading for much of the day.
As much as 15 percent of United's customers may forsake the carrier for rivals, said Kevin Mitchell, chairman of the Business Travel Coalition, which represents companies whose employees fly frequently. "Less capacity is going to mean the ability to put prices up more."
Fares already rising
Fares already are edging up after the Sept. 11 terrorist attacks and recession pushed down demand for business travel. Ticket prices at major carriers rose in September and October after declining for 18 months, according to the Air Transport Association, a trade group for major U.S. carriers.
Still, the average October fare was 19 percent below the amount charged in the 2000 period by major carriers.
Airlines are having so much trouble raising prices that a bankruptcy by Chicago-based UAL may not help the industry as much as some analysts are forecasting, said Michael E. Levine, a Yale University law professor and former senior executive at three airlines.
Major carriers are "leaking share at a tremendous rate to discount airlines" such as Southwest Airlines Co., Levine said. "That's not going to stop."
Airlines such as American and Frontier that compete with United at its hubs won't be able to lure UAL customers if they raise their fares, said Robert Mann, president of the airline economics and labor consulting firm RW Mann & Co.
United's market share in October, measured by miles flown by paying passengers, was 17.1 percent; AMR Corp.'s American was 19 percent; Delta's was 14.9 percent; Northwest Airlines Corp.'s was 11.3 percent; and Continental's was 9.3 percent, according to figures from Eclat Consulting published in Aviation Daily magazine.
BACK TO TOP |
BURBANK, Calif. >> Walt Disney Co. said a possible bankruptcy of United Airlines owner UAL Corp. might lead to writing down its $114 million leveraged investment in the carrier's aircraft leases, Bloomberg News reported. United bankruptcy
could hit DisneyDisney said in a regulatory filing yesterday that its investment portfolio includes $289 million of "commercial aircraft leveraged leasing investments" made between 1992 and 1994. United Airlines leases made up $114 million of the total, with the rest from Delta Air Lines Inc. and FedEx Corp.
