Red alert for US carriers: British Air raises money

There have been a lot of articles in the press about the bleak future of U.S. airlines. If anyone needed confirmation about how tight cash is getting in the industry, they only need look at the U.K. flag carrier British Airways.

According to The Wall Street Journal, BA will bring in cash in a combination of new bond issues and an agreement with the company's pension fund. All in all, it will give BA access to almost $1 billion.

BA is better off than several U.S. airlines, especially American parent AMR (AMR) and United parent UAL (UAUA). AMR's stock is down 60 percent this year and UAL's is off 70 percent.

The problem that the U.S. carriers have is that their losses are so great that the capital markets may not be willing to fund them. If that is the case, they will have to resort to mergers or bankruptcies. At least Chapter 11 is an honored tradition in the airline industry and sometimes allows a carrier to operate without interruption. Mergers will be difficult because they take so long to complete. Some American carriers have too little cash to wait out a process like that.

When a relatively healthy airline like BA has to come up with close to $1 billion, it is time to pull the fire alarm.

Douglas A. McIntyre is an editor at 24/7 Wall St.


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