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Bankruptcies not seen hurting planemakers

Planemakers Boeing Co. and Airbus will emerge mostly unscathed from the bankruptcies of two of their biggest U.S. customers, analysts said Thursday.
/ Source: Reuters

Planemakers Boeing Co. and Airbus will emerge mostly unscathed from the bankruptcies of two of their biggest U.S. customers, analysts said Thursday.

Delta Air Lines Inc. and Northwest Airlines Corp., the third- and fourth-largest U.S. airlines, both filed for court protection from creditors on Wednesday, dramatizing the crisis that is gripping the sector.

Chapter 11 would give them the flexibility to end leases on existing planes and could also pave the way for the carriers to cancel expensive aircraft orders as they look to trim excess seats and boost ticket prices.

But the top airplane makers -- who are riding an order boom on the strength of demand in China, India and other emerging markets -- are likely to have little trouble finding buyers for whatever planes Delta and Northwest decide not to take.

"The amount of air traffic is not going to change; it's just who's operating the planes that's changing," said Paul Nisbet, an analyst with JSA Research.

Delta had 55 unfilled orders from Boeing, which is listed in its bankruptcy as an unsecured creditor owed $3.7 billion, but a spokesman for the Chicago-based aerospace company said that figure reflected planned deliveries, rather than loans.

Northwest earlier this year ordered 17 of Boeing's hot-selling composite 787 mid-sized jet, which is scheduled to start commercial flights in 2008.

"Were those orders to be canceled I think the delivery slots would be taken up rather quickly," said J.B. Groh, an analyst at D.A. Davidson.

'Gas guzzlers'
Moves by the airlines to sell off or cancel leases on existing planes like aging McDonnell Douglas DC-9s or Boeing 767s in their fleet could have some impact on used plane prices but are unlikely to hit demand for new ones, Groh said.

BankAmerica analyst Robert Stallard agreed.

"An airline that is considering buying a new plane will not want to pick up one of these gas-guzzlers over a new, fuel-efficient aircraft," he said in a note.

Boeing shares were up 42 cents, or 0.7 percent, at $64.60 in afternoon trading on the New York Stock Exchange, outperforming a flat Amex Defense index . Airbus's majority owner EADS rose 0.1 percent in Paris trade.

Still, some analysts were more pessimistic.

"These bankruptcy filings demonstrated the structural financial problems in the U.S. market, accounting for about 40 percent of the global traffic, due to overcapacity and support our view that the industry is in a bubble," said Smith Barney analyst George Shapiro in a note.

The shockwaves from the bankruptcies could also be felt at regional jetmakers Bombardier Inc. of Canada and Embraer of Brazil.

Delta and Northwest are among Bombardier's biggest customers, especially for its original 50-seat CRJ200 jet.

An Embraer executive, speaking on condition of anonymity, said its only exposure was through regional operators that coordinate schedules and ticketing with Delta.

Still, he said, the filings came as a shock.

"We already expected the Delta and Northwest bankruptcies, just not that the two would file on the same day," he said. "Of course, any airline upheaval harms the whole industry."