This Day On The Street
Continue to site right-arrow
ADVERTISEMENT
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!

Lessons for Detroit in '01 Airline Rescue

CHARLOTTE, N.C. -- Government backing can save ailing companies, even help to make them viable. Just ask US Airways (LCC).

In 2001, in the aftermath of the Sept. 11 terrorist attacks, which worsened an increasing drop-off in air travel, Congress created the Air Transportation Stabilization Board, equipping it with the power to guarantee loans to keep airlines afloat.

The precedent is a valuable one, as Washington considers how to help General Motors (GM - Get Report), Ford (F - Get Report) and Chrysler at a critical time in their history.

US Airways was by far the biggest beneficiary of the ATSB. In 2002, it was awarded a $1 billion loan, of which the ATSB guaranteed $900 million. The loan helped it to survive two bankruptcies and eventually to engage in a successful merger. Merger partner America West was also an ATSB client, receiving a $429 million loan in 2001.

Today, US Airways is prospering -- to the extent that airlines prosper -- and the ATSB has shut down, its work completed. In the US Airways deal alone, the board made more than $300 million in fees, interest and profit on the sale of warrants, and it saved the nation's seventh-largest carrier.

"Both these airlines would be nonexistent had they not merged," said US Airways CEO Doug Parker, in a recent interview. "But merged, we saved 35,000 jobs."

Then, a sharp drop in traffic highlighted structural flaws in the airline industry, and lenders shied away from carriers. Now, a sharp drop in spending highlights structural flaws in the auto industry, and lenders shy away from everybody.

1 of 4

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!
SYM TRADE IT LAST %CHG
LCC $0.00 0.00%
F $16.34 0.00%
GM $37.31 0.00%
AAPL $128.46 0.00%
FB $78.97 0.00%

Markets

DOW 18,132.70 -81.72 -0.45%
S&P 500 2,104.50 -6.24 -0.30%
NASDAQ 4,963.5270 -24.3630 -0.49%

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