Airlines are in a financial nose dive

The pundits are having a field day, thanks to the messy condition of the airline industry.

One analysis of recent airline bankruptcies and shutdowns suggested a "canary in the coal mine" analogy, opining that the abrupt folding of several carriers is the first sign that the industry will soon gasp its last breath.

It's true that the news has been far from good. In one week in April, Aloha Airlines, ATA and Skybus abruptly stopped flying, stranding passengers and crew in far-flung corners of the globe.

Charter carrier Champion Air announced that it, too, would stop flying, battered by escalating fuel costs and the loss of two major charter clients.

Earlier, MaxJet, an all-business-class carrier based at London's Stanstad Airport with flights to New York City, closed up shop. Oasis Hong Kong Airlines, a carrier with service from and within the China market to the west coast and newly-announced plans to expand to Chicago, shut down its engines for the last time.

Frontier Airlines, a Denver-based carrier playing third fiddle to United and Southwest in that market, was pushed to declare bankruptcy when its key credit card processor, First Data Corporation, concerned about the carrier's weak cash position, decided to hold back a bigger chunk of the airline's ticket revenue.

Unlike the other carriers, Frontier says it will continue to operate while it reorganizes under Chapter 11 bankruptcy protection.

Bankruptcies now a big deal

It wasn't that long ago that major U.S. airlines routinely filed for Chapter 11 protection, continued to fly, emerged from bankruptcy and, in some cases, did it all over again, to the point where business travelers shrugged and viewed it as "no big deal."

As long as flights took off and travelers got to where they needed to go, there was little concern about what the airlines were doing in the accounting department.

It was a rude awakening, then, when three airlines in one week abruptly parked all of their planes with no advance warning. True, they were not mainstream players in the world of business travel, but still -- quit the business?

What did this mean for those carriers still aloft? They're struggling because of:

• $125-a-barrel oil prices
• Aging fuel-guzzling fleets
• The Federal Aviation Administration (FAA) crackdown on aircraft maintenance
• Employees increasingly fed up with reduced pay and strained work environments
• Shifting traveler demand

So, who will be next?

There is plenty of speculation about which of several weak links will break under the strain. Most analysts agree that the "Big Six," have enough cash to weather the continuing turbulence, at least this year.

But what about the regional carriers that ferry travelers from secondary markets (like Madison) to major hubs where they board the Big Six?

Standard & Poor's airline analyst Jim Corridore recently said, "The major airlines are trying to cut costs as much as possible, and the regionals are one area where they can do that."

The bottom line

The bottom line is this: Analysts' observations aside, the industry is in extreme turmoil, and the business traveler is the one most likely to take it on the chin.

It's not enough to assume a "Que sera, sera" attitude, because the possibility is real that the next airline bankruptcy or shutdown will directly affect how you do business.

What to do

How can you protect yourself and your company's travelers?

For starters, keep up with airline industry news. Mainstream media or online sources like AirWise, Yahoo Finance Airline/Aviation News or a weekly subscription business traveler newsletter like Joe Brancatelli's "JoeSentMe" will keep you up to speed on the latest industry tsunamis.

If you've been considering a "pay-now-fly-later" multiticket offer from your preferred carrier, you might want to put it on the back burner until the dust settles.

With major mergers pending approval or done-deals, what you see today might differ substantially from what you get tomorrow.

If you are not charging your air travel to a credit card, reconsider -- NOW.

If you have an open-account arrangement with a travel management company and you've purchased but not yet used airline tickets on a carrier that ceases operation, in all probability you will join a long line of unsecured creditors hoping to salvage even a small percentage of monies paid.

The credit card Fair Credit Billing Act does provide some protection when an airline ceases operation, shielding you from paying for services not received.

If you don't currently have a company credit card, check out various options online at CreditLand or search for "business credit cards" at Business.com.

Frequent flyer plans

Next, what about your airline frequent flyer program and all those heard-won points? Should you continue to pledge loyalty, or escalate mileage-burn-to-the-max?

Even if your preferred carrier continues to operate but merges with another major carrier, how will this affect your mileage status?

If you rank among your airline's super-elite travelers, you might have some negotiating currency with the newly-structured carrier.

But if you're like most of us who have a "nice-but-not-premier" stash of points, options might be more limited, as program parameters shift and change. And with fewer carriers (and far-fewer "free" seats) in the air, your points might languish indefinitely -- or until canceled by the airline.

If you decide to go for the burn, do it prudently. Begin by determining what it would cost to purchase a ticket to your chosen destination on your airline in your chosen class of service.

Using frequent flyer miles only to snag a low-priced seat means your miles would be worth just a faction of a penny. Instead, play around with destinations, routes, travel dates and fares and spend your miles on those tickets that offer the greatest per-mile value.

Avoid hoarding miles

As tempting as it might be to continue this long-held habit, try to avoid hoarding frequent flyer miles. While banking a million miles might feel good, the downside could be dramatic if your carrier files for bankruptcy, ceases operation, merges with another carrier or downsizes its fleet.

As a business traveler, your goal is to find a time-efficient, economical and safe way to get to and from your destination, meet with your client, service your equipment, attend a seminar.

Canary-in-the-mine-shaft analogies aside, air travel is not going away. Though the current cluster of carriers might look quite different a year from now, they will continue to be one of the best options for getting the job done.

Betty Stark is a Madison travel industry consultant and business travel writer with 25 years' experience.