AirlineFinancials.Com founder Robert Herbst made a point in a story line here about American Airlines that I think is, perhaps, the most salient yet made. 

Among the SuperLegacy Airlines, there is now as much as a $2Billion gap in profitability between them and American Airlines.   That’s a big gap. 

Controlling costs alone don’t close that gap and waiting for United and Delta to move upwards on their labor costs isn’t exactly a good, near term strategy. 

Herbst thinks they’ll have to declare bankruptcy in 2 to 4 more quarters.  That might be the smart thing to do in the sense of preserving enough cash to exit bankruptcy and continue on as a viable airline.

American Airlines has some of the most saavy financial people in the airline industry and there is a lot of ego in that group when it comes to managing money.  They do it better than virtually any other airline.  I don’t see them admitting defeat and entering bankruptcy that quickly, myself.

That said, ego and $3.98 will buy you a fine cappucino at Starbucks.

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