24/7 Wall St.

Based on several pieces of analysis, the US airline industry will lose over $7 billion this year. If jet fuel stays high and a recession cuts passenger counts, the figure could go much higher.

Several major airlines, particularly AMR (AMR), trade near liquidation value. The company’s market cap is now 7% of total revenue. Numbers at Delta (DAL) and United (UAUA) are not much better.

In a call which could not even be called "better late than never", S&P has put a number of airlines on its watch list and may downgrade them. The agency even thinks one or more carriers could turn to Chapter 11. According to The New York Times, A senior credit analyst with S.& P., Philip A. Baggaley, said the action was taken because of “potential severe financial damage” that could result from record fuel prices.

To put that another way, S&P has not even downgraded the carriers yet, It is simply looking at that possibility.

With substantial debt loads, the first big airline bankruptcy could be less than a quarter away. Several small carriers have already filed Chapter 11. American is cutting its capacity by 12% and taking a number of older planes out of service. Thousand of people could lose jobs.

S&P may see several airlines fail financially before its changes its ratings.

Douglas A. McIntyre