http://www.usatoday.com/travel/flights/item.aspx?type=blog&ak=68121983.blog

Will the recession force U.S. airlines into bankruptcy?

That's the question addressed by The Associated Press in a Q&A format evaluating the financial health of the U.S. airline industry. How have major airlines avoided bankruptcies during one of the worst economic downturns in decades? "The answer is because they went through bankruptcy in the last downturn, and they're still benefiting from that," Michael Derchin, an analyst for FTN Equity Capital Markets, tells AP.

Delta, United and US Airways all used the bankruptcy process to dramatically cut labor and other costs earlier this decade. Others, notably American, were able to get significant concessions from unions that lowered costs but also kept the carrier from being forced to file for Chapter 11 protection. "Those moves put the airlines in better shape to survive when the current recession hit last year," AP writes. That, in part, explains why the airline industry has so far been able to weather the current economic crisis better than most other sectors of the U.S. economy.

However, that doesn’t mean that U.S. carriers are not feeling the pinch of the current downturn. Travel demand is down dramatically, especially among the industry's most-lucrative subset of customers – business travelers. Still, Bill Warlick, an analyst with Fitch Ratings, predicts even the USA's weaker airlines should make it through 2009, though he says "it's going to be tight for a couple of the carriers."

As for airlines where things could be "tight," AP writes "Warlick rates United, US Airways and (American) as the most troubled when measured by cash reserves as a percentage of annual revenue. He puts Continental and Delta next, with the low-cost carriers such as Southwest in better shape, partly because they're not exposed to the weak international-travel market."