GE keeps loser airlines alive
General Electric helping keep the likes of Delta, United, US Airways…afloat.
GE owns about 1,300 aircraft and a massive aircraft-engine unit, and it has more than $29 billion in loans and leases to airlines. And, it’s GE’s money that is keeping many of its money loosing airline customers aloft.
Since 2001, GE’s finance divisions have sunk more than $8 billion into global airlines, with a big chunk of that going to money-losers such as Delta Air Lines and United Airlines, reports BusinessWeek. GE has also allowed struggling airlines to defer payments on leased aircraft, thus helping them keep more planes in the air and continue a price war on the ground.
But while extending lifelines may be good for GE, it may be bad for the airline industry. Airline executives roundly blame their losses on too much capacity, arguing that they can’t boost airfares to cover costs because there is always someone willing to offer bargain tickets.
Why is GE so eager to lend a hand? It makes money off the well-collateralized loans and wants to keep as wide a customer base as possible. Even if one of the larger airlines were to fail, GE’s hit would be minor.
David
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