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DALLAS — The slump in revenue at U.S. airlines is slowing and the carriers' financial health should improve modestly over the next year, according to a major credit-rating agency.
Still, after two years of weak revenue, some carriers are running relatively low on cash and will need "emergency sources of capital" to survive the winter, Fitch Ratings said in a report Wednesday.
The airlines are already building up their cash balances in expectation of a dismal winter.
The most dramatic moves have been made at American Airlines parent AMR Corp., which in the past week moved to raise about $3.6 billion by selling and leasing back aircraft, selling frequent-flier miles and issuing new stock and debt.
Fitch analyst Bill Warlick told reporters Wednesday that because of their ability to raise cash, even the financially weakest carriers now appear likely to get through the winter without being forced into bankruptcy protection. That was a more optimistic outlook than Fitch gave in July.
Several major airlines have gone through bankruptcy this decade; US Airways has done it twice. Whether in or out of bankruptcy protection, they have already cut the cost of labor deals, dumped their pension plans and marked down the value of their fleets, leaving little room to raise cash in the next downturn, Warlick said.
The industry's weak fundamentals could lead to consolidation — maybe not one airline buying another, as Delta did with Northwest last year, but "opportunities for other carriers to swoop in and pick up assets on the cheap," Warlick said.
Southwest Airlines Co. is the only major carrier that Fitch rates investment-grade; the others are several layers deep into speculative or junk territory.
Fitch also examined the creditworthiness of the nation's 60 largest airports, which have seen a downturn in passengers — that cuts into revenue from parking, shopping and rental cars.
Analyst Seth Lehman said the severe downturn caught airport executives by surprise, and the recovery will be slower than they expect.
