By Chris Reiter and Kyle Peterson
NEW YORK/CHICAGO (Reuters) - A slowing U.S. economy and soaring oil prices could cripple the U.S. airline industry's fledgling recovery and push carriers into seeking merger partners.
For the last year and a half, major carriers like AMR Corp's (AMR.N: Quote, Profile, Research, Stock Buzz) American Airlines and Continental Airlines Inc (CAL.N: Quote, Profile, Research, Stock Buzz) have been clawing back some of the $35 billion in losses racked up during the industry's long slump following the September 11, 2001, attacks.
Despite the recent turnaround, the industry remains fragile, and losses could return if the airlines are unable to pass on higher oil prices to their customers.
"If you can't make lots of money when your planes are loaded, then you're in deep dog poo when things turn against you," said Richard Gritta, a finance professor at the University of Portland, Oregon, who studies the airline industry.
Even with packed planes, the U.S. airline industry eked out a profit margin of about 1.9 percent in 2006, according to data from the Air Transport Association.
Mergers are seen by many industry experts as the answer to the boom-and-bust cycle that has plagued U.S. carriers for decades.
While deals -- which face formidable obstacles such as potential antitrust issues and labor opposition -- have been rare, that could change.
Airline managers are under mounting pressures from disgruntled shareholders to boost value by selling off assets or merging. Continued...
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