24/7 Wall St.

Not long ago daily media stories were predicting which major airline would be the first in line to fail. Las Vegas type odds were given to a list of inevitable airline bankruptcies.

There should be no argument the US airline industry is facing unprecedented challenges as they restructure their business models to survive with record high fuel costs and a questionable forward looking Global economy.

In reviewing recent 2nd quarter financial reports, it is obvious cash liquidity has become a very high priority for airline management going into the future.

Using various types of financing initiatives and asset sales, five of the eight largest US Airlines increased their unrestricted cash positions by significant amounts.

   (billions)                                    AA      UAL     DAL    CAL     NWA   SWA   USAir   JBLU
Cash 3/31/2008                            $4.41   $2.92   $2.60   $2.52   $3.23   $3.12   $2.07   $.753
Projected cash available 6/30         $5.93  $4.40    $3.34   $4.31   $3.26   $5.84   $2.29   $1.35

In consideration that DAL and NWA will acquire approval for their merger by year end, only USAir appears to have a potential cash liquidity problem in the near-term. (See table)

In my opinion, the increased cash liquidity and upcoming capacity cuts combined with recent fare increases make -predictions- of airline failures very pre-mature.

Robert Herbst has been a commercial pilot since 1969. His aviation experience and financial background provides a unique analytical perspective into the airline industry. His website: Airlinefinancials.com provides airline industry analysis and commentary for major US carriers.