Italian carrier Alitalia-Linee Aeree Italiane SpA sought protection from creditors and filed for insolvency in Rome on Aug. 29. The government, with a 49.9% interest in the company, has worked for nearly two years to find a buyer for the carrier which has long-teetered near bankruptcy. A month later, a group trying to save the airline turned its efforts toward negotiating the sale of a minority stake in the Italian carrier to either Air France-KLM or Deutsche Lufthansa AG, having won union support for the plan, The Deal's Paul Whitfield noted. See more here.

The last few months have been rough for carriers. April was particularly dark and May and June were cloudy. The latest filing came June 18, when Gemini Cargo Logistics Inc. filed for Chapter 11 protection, for the second time, downed by rocketing fuel prices. The carrier was also at the time the latest PE-backed bankruptcy and listed more than 1,000 creditors in its filing. (See Dealwatch: PE-backed bankruptcies for more.)

Meanwhile, U.K. all-business-class carrier Silverjet plc, which was grounded at the end of May and filed for administration after backer Viceroy Holdings failed to extend a $5 million loan, looked like it would be rescued. Swiss investment company Heritage Cie. SA agreed June 11 to buy it out of bankruptcy for undisclosed terms. The deal failed two days later.

Capping off April -- a particularly active month for carriers running into turbulence -- Eos Airlines Inc. filed for bankruptcy. The Purchase, N.Y.-based New York-to-London business carrier filed for Chapter 11 April 26 in the U.S. Bankruptcy Court in the Southern District of New York and ceased operations April 27. It said May 23 it had won approval for an asset auction. But the Eos filing followed several of late. A recap:

• April 11: Denver-based Frontier Airlines Holdings Inc., the parent company of Frontier Airlines, slid into Chapter 11, saying its credit card processor had unexpectedly informed the airline it planned to begin withholding "significant proceeds" from Frontier ticket sales, which would have put the squeeze on the company's liquidity. Unlike its fellow discount carriers that sought protection of late, Frontier said it plans to continue business as usual.
• April 9: Long-haul budget airline Oasis Hong Kong Airlines Ltd. said it had stopped flying and applied for voluntary liquidation.
• April 5: Columbus, Ohio-based Skybus Airlines Inc., which took to the skies only 10 months earlier, filed for Chapter 11 and ceased operations. Shortly after the filing, its founder said the company could fly again.
• April 3: ATA Airlines filed for Chapter 11 and stopped operating.
• March 31: Hawaii's Aloha Airgroup Inc., the parent of Aloha Airlines Inc., halted passenger operations after landing in bankruptcy for the second time in recent years.

NEXT UP?

Amid the bankruptcy crashes, Whiteman wondered April 7 which airline would file next. "And while no one is predicting a near-term shutdown of carriers such as Frontier Airlines Holdings Inc. [indeed, Frontier has not ceased operations], Spirit Airlines Inc., Midwest Air Group Inc. and Virgin America Inc., these airlines are being watched closely," he wrote.

Spirit Airlines

Spirit's model, he noted, is somewhat similar to Skybus, which charges for checked baggage, and food and beverages, but Spirit has a better route network serving Caribbean destinations thereby giving it less exposure to competition from rival discounters. However, its markets heavily rely on tourism, which could fall off if the economy enters a prolonged recession.

Midwest

In accepting a $450 million take-private from white-knight bidder TPG Capital in August, Milwaukee-based Midwest escaped the reigns of hostile bidder AirTran Holdings Inc. "Midwest's fate could be tied to how willing TPG is to contribute new capital to the airline to help it buy new planes, which in turn could be determined by how bad the U.S. economy gets in the coming months."

Virgin America

Virgin America is a question mark after less than a year in operation. It lost $35 million in its first quarter of operations, Whiteman noted, but it has Richard Branson, as well as U.S. investors Black Canyon Capital and Cyrus Capital Partners behind it, who have already put up nearly $162 million. Whether they will fund continuing losses, though, is the question.

A LITTLE PERSPECTIVE

Whiteman offers a bit of context to the current, seeming rash of filings and how larger players will likely fare:

The U.S. majors, which went through a round of restructuring earlier in the decade that included nearly a half-dozen bankruptcy filings, have large cash hordes and route networks loaded with international flying that does not face the price competition experienced at home. Established discounters like Southwest Airlines Co. and AirTran Airways Inc. have low costs and fuel hedges in place that should allow them to remain competitive regardless of the price of oil. These airlines will undoubtedly be bruised, but are more likely considering dealmaking during this period of weakness than they are pondering bankruptcy filings.

But if history is a guide, there could be more casualties. The U.S. industry has always seen airlines fail when a downturn strikes, with Midway Airlines, Vanguard Airlines and Legend Airlines among the fatalities from the slowdown earlier in the decade.

CO-PILOTING

But some, having made it through reorganizations, or in order to be strong enough to emerge, have sought merger partners and carried on.

Take Delta Air Lines Inc. and Northwest Airlines Corp., which agreed to a deal April 14 after months of circling each other and trying to win labor approval for a deal. Reports indicated April 11 that pilots had reached a tentative deal that would allow for a merger, after months of impasse. The pair resumed talks April 7, weeks after pilots rejected arbitration March 19, stuck at a crossroads. It had looked like the airlines' pilots were on board Feb. 19, but the picture was cloudier just a week later.

Delta soared out of bankruptcy April 30, 2007, ahead of schedule, followed by Northwest, which headed for the exit May 31. Delta flew solo after months of standing firm against a would-be acquirer in US Airways Group Inc. Its creditors formally backed the plan for independence in late January, rebuffing a $10.2 billion takeover offer from US Air. It happened a day after Delta secured a $2.5 billion exit financing package and days after reports surfaced that US Air was considering raising its offer. After winning an extension to reorganize until June, Delta pledged March 20 to pay its workers $480 million in cash and stock upon its emergence. It unveiled plans Aug. 21 to install former Northwest CEO Richard Anderson as its chief executive, which again stirred the M&A rumor mill.

US Airways first presented its merger case to Delta in November 2006, which the target shot down. Had it not, the deal would have recalled Tempe, Ariz.-based US Airways' $1.5 billion merger with America West Group Holdings Corp. in 2005, which formally ended its own stay in Chapter 11.

Then there is also UAL which said Aug. 24, 2007, it could sell off its maintenance business to shore up some cash, a deal that analysts estimated could yield $300 million to $600 million. In December 2006, speculation swirled around UAL and Continental Airlines Inc. Rumors regarding UAL first took flight in September 2006 after a published report revealed it had hired Goldman, Sachs & Co. to explore strategic alternatives. During its nearly three years in bankruptcy, UAL cut 25% of its workers, trimmed more than $10 billion in debt and cut annual costs by more than $7 billion before resurfacing post-Chapter 11 in February 2006.