e Technology, 00052175, 3/29/2004, Vol. 160, Issue 13
Are the Big Six network U.S. airlines ù and possibly much of the industry ù already down for the count in 2004? Recovery prospects are fading fast, says DBS' Sam Buttrick. He widened his industry loss forecast for this year to $2.3 billion from $500 million blaming galloping fuel prices and continued weak domestic revenues. The carriers' deep cost reductions and rising international demand have not been adequate to put things right financially.
Kevin P. Mitchell, chairman of the Business Travel Coalition, underscores Buttrick's observations. He says the network carriers still haven't received the message that times have changed. Business travelers are now "permanently price-sensitive." The cause, in Mitchell's view: U.S. companies need low-priced air fares to compete as they are straining under intense pressures to be low-cost producers.
Shares at most airlines have lost altitude since October. Buttrick says high oil prices have played a role, but the bigger factor undermining the recovery is "faltering domestic revenue." From the standpoints of risk and reward potentials, the analyst believes the next 12-24 months "favor the large, leveraged legacy carriers" over high-growth operators. For that reason he advises looking into Northwest Airlines. It's protected by its quasi-monopoly hubs, significant streng
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