Airlines Also Show the Power of Cash

Posted by: Justin Bachman on September 20

Cash is king. We’ve all heard that old bromide a thousand times, and yet it was really driven home this week as we saw the headlines top each other about the liquidity debacle that overtook Lehman Brothers, Merrill Lynch, AIG and others. Banks – which rest on a foundation of trust about their solvency – found themselves in fiscal free fall. The firms with the strongest balance sheets, ie, cash, have not been as afflicted: Wells Fargo, Goldman Sachs, SunTrust.

The same holds true for airlines, as my travel partner Dean points out this week in a story in the print edition of BusinessWeek. Scrubbed balance sheets resulting from Chapter 11 reorganizations, plus conservative management, deep employee concessions, corporate travel accounts, and easing fuel costs have left some of the big players in relatively decent shape. Think American, Delta/Northwest, Continental, Southwest. They can sit back and watch as less flush rivals bleed. The winnowing power of capitalism, in a sense.