This Day On The Street
Continue to site right-arrow
This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here
Cramer's Action Alerts PLUS - See his portfolio and get alerts BEFORE every trade. Learn more NOW!

The Airlines Could Show Big Three the Way

The airline industry thinks the automakers are nuts.

After all, while "bankruptcy is not an option" has become a mantra for automakers, the legacy airlines expect to post profits in 2009, largely because recent bankruptcies prepared them to deal with the troubled economy.

Auto executives reiterated their stand at a Senate Banking Committee hearing Tuesday, with General Motors (GM - Get Report) CEO Rick Wagoner proclaiming that "80% of consumers would not consider buying a car from a company in bankruptcy."

Chrysler CEO Bob Nardelli agreed, while Ford's (F - Get Report) chief, Alan Mulally, generally stayed away from the topic. "We believe we have sufficient liquidity to make it through this slowdown," he said.

Between 2002 and 2007, four of the six legacy carriers went through Chapter 11 bankruptcies, and all four emerged better off.

Delta (DAL - Get Report) recently merged with Northwest to form the world's biggest airline. US Airways (LCC) joined forces with America West to create a carrier far more successful than either was individually.

UAL (UAUA) failed in a seemingly endless, almost comical quest to find a merger partner. But it did shed $7 billion in annual costs, including more than $3 billion in labor expenses.

The airlines' experience earlier this decade offers a lesson for the automakers, says Michael E. Levine, a senior lecturer at New York University School of Law and a former airline executive.

For decades, legacy carriers and automakers dominated their respective markets, facing virtually no competition. The airline industry was regulated, and the auto industry might as well have been. When lower-cost providers came along, the existing major players were so entrenched they couldn't cope.

1 of 3

Check Out Our Best Services for Investors

Action Alerts PLUS

Portfolio Manager Jim Cramer and Director of Research Jack Mohr reveal their investment tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
Quant Ratings

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
Stocks Under $10

David Peltier uncovers low dollar stocks with serious upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
14-Days Free
Try it NOW
Only $9.95
Try it NOW
14-Days Free
Try it NOW

Check Out Our Best Services for Investors

Dividend Stock Advisor

David Peltier identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Updates with exact steps to take - BUY, HOLD, SELL
Trifecta Stocks

Every recommendation goes through 3 layers of intense scrutiny—quantitative, fundamental and technical analysis—to maximize profit potential and minimize risk.

Product Features:
  • Model Portfolio
  • Intra Day Trade alerts
  • Access to Quant Ratings
Options Profits

Our options trading pros provide over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.

Product Features:
  • Actionable options commentary and news
  • Real-time trading community
Try it NOW
Try it NOW
Try it NOW
To begin commenting right away, you can log in below using your Disqus, Facebook, Twitter, OpenID or Yahoo login credentials. Alternatively, you can post a comment as a "guest" just by entering an email address. Your use of the commenting tool is subject to multiple terms of service/use and privacy policies - see here for more details.
Submit an article to us!
LCC $0.00 0.00%
DAL $45.15 0.00%
F $16.03 0.00%
GM $37.57 0.00%
AAPL $128.54 0.00%


DOW 18,096.90 -106.47 -0.58%
S&P 500 2,098.53 -9.25 -0.44%
NASDAQ 4,967.1410 -12.76 -0.26%

Partners Compare Online Brokers

Free Reports

Free Newsletters from TheStreet

My Subscriptions:

After the Bell

Before the Bell

Booyah! Newsletter

Midday Bell

TheStreet Top 10 Stories

Winners & Losers

Register for Newsletters
Top Rated Stocks Top Rated Funds Top Rated ETFs