NEW YORK (CNN/Money) - US Airways faces a serious risk of going out of business, according to some leading airline analysts, despite claims by the CEO of the nation's No. 7 airline that no liquidation is imminent.
The biggest threat right now to the major carriers is soaring oil prices.
Fuel is an airline's No. 2 cost behind labor, and the nation's older airlines also face much higher pension costs than their newer low-cost, low-fare rivals. Those carriers, a growing competitive threat for the major carriers, have thwarted numerous attempts by the larger airlines to raise fares this summer.
In addition to US Air, No. 3 Delta Air Lines also has confirmed that a bankruptcy filing is possible. And No. 2 United is struggling to find a way to emerge from bankruptcy and has filed to end its pension funds after missing a payment.
But US Air is generally seen as the airline facing the greatest threat of shutdown, even though it already survived one trip through bankruptcy.
Who would rescue US Air?
Phil Baggaley, airline analyst at S&P, said the chance of the airline avoiding another bankruptcy filing is less than 50-50. And while a bankruptcy filing would probably be under Chapter 11, he said its chance of winning the financing needed to reorganize would be less than 50-50 as well.
"Basically time is running out. They have a whole series of deadlines coming up in September," he said. "The problem is would US Airways be able to attract financing to emerge from bankruptcy again, even with a new round of labor concessions?"
Ray Neidl, airline analyst with Blaylock & Partners, said he puts US Air's chances of avoiding liquidation at only about 50-50 at best, although he thinks they have a chance if they win new concessions.
"We're at the point now where major restructuring, major reforms have to be made," he told CNNfn. "Certain airlines are going to have to disappear. There's no way US Airways is going be competitive with the low-cost carriers invading its territory if it doesn't get these sharp cuts."
US Air officials would not comment on the risk of liquidation, instead referring to a letter that CEO Bruce Lakefield sent out to employees Thursday.
"While Chapter 11 is a possibility, the talk of an imminent shutdown, a disruption of service, or impending liquidation is simply not true," Lakefield said in the letter. "If Chapter 11 becomes necessary, our survival will remain dependent upon transformation. One way or another, we need new labor agreements."
But company Chairman David Bronner, CEO of the Retirement Systems of Alabama which is the majority shareholder of US Air, was quoted earlier this week as saying the airline would likely face liquidation if it was forced into bankruptcy. Bronner's office referred phone calls Friday back to US Air.
Other major carriers face trouble
US Air is not the only airline facing the risk of liquidation in the coming months, according to Baggaley.
He said United Air parent UAL Corp., which has been in bankruptcy court for 20 months, might also have trouble emerging from bankruptcy unless it can cut its pension cost.
The airline has petitioned the bankruptcy court to allow it terminate its pension plans. Baggaley said he thinks that request will be approved, despite strong opposition from the airline's unions and the federal agency that would have to assume the underfunded plans, the Pension Benefit Guarantee Corp.
The United official who handles bankruptcy issues was not available Friday.
Blaylock's Neidl also said he believes that UAL will eventually be able to win the pension concessions, either from the courts or the unions.
"It's very difficult to ask employees to change their pension plans," he said on CNNfn. "It's even tougher than salary cuts. United is up against the wall. They're not going to get an investor (to help them emerge from bankruptcy) unless they change pension plan and somehow resolve the underfunded pension liability."
Other airline analysts said history shows that even with the dire financial situation facing US Air, United and other big carriers, liquidation in the next year remains unlikely.
"Liquidation is something that happens rarely in the airline industry," said industry economist David Swierenga, president of consulting group AeroEcon. "We've seen in the past, they can last for a long time even when they're losing money."
Whether or not they think a liquidation is a serious threat or unlikely, the experts agree that even a shutdown of a carrier would do little to help airlines raise fares.
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Michael Allen, consultant with BACK Aviation, said that even in the case of a shutdown, whoever owned the aircraft would be looking to sell them and that any drop in capacity would be minor and short-lived.
"Even without a liquidation, the low-cost carriers have a lot of capacity coming in," said Allen, who agrees with Swierenga that a liquidation is unlikely. "It (liquidation) is not going to be a picnic in terms of fare raising."
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