lion (Collins, 1991b, p. 252). Increased depreciation charges will push the industry as a whole into a negative profitability situation for all of 1991, as the estimated industry net loss for the year is $270 million (Collins, 1991b, p. 252). The industry net profit margin in 1987 was 4.4 percent, while the net loss in 1991 is projected at 0.6 percent. The industry is projected to return to marginal profitability (two percent net profit) in 1992, and to increase its net profit margin to 3.5 percent by 1996 (Collins, 1991b, p. 252). Total long term debt in the airline industry in 1991 is $10.8 billion, or 0.9 times shareholder equity (Collins, 1991b, p. 252).
The plight of many individual carriers is much worse than the average conditions for the industry. This point may be illustrated through an examination of profitability at six of the nation's major trunk carriers in 1991 American Airlines (the largest American carrier), Continental Airlines (the fourth largest American carrier), Delta Airlines (the third largest American carrier), Pan American Airlines (sixth largest American carrier, which has since terminated operations), United Airlines (the second largest American carrier), and USAir (the seventh largest American carrier). Northwest Airlines in the fifth
largest American carrier. Continental, Pan American, and USAir had, in 1991, sought protection from creditors through filing under Chapter 11 of the federal bankruptcy act. Trans World had, in 1991, simply suspended payments to creditors, while the company attempts to renegotiate loan and lease terms (Collins, 1991b, p. 251).
Operating profitability reached a post deregulation peak 14.2 percent at American Airlines in 1985 (Collins, 1991a, p. 253). By 1990, operating profitability had slipped to 7.2 percent. Overall, American remained profitable through 1989. In 1990, however, American suffered a net loss of $39.6 million (Collins, 1991a, p. 253). Depr...