For the airline industry, the war's end may look like the light at the end of the tunnel -- but getting there will make for some dark days.
The Air Transport Association, a trade group representing the commercial airline industry, said Wednesday that overall traffic in the week since the war began was down 10% from year-ago levels. Routes over the Atlantic were hit hardest, with traffic off 25%, while Pacific routes saw a 13% drop.
Going forward, the situation looks even more grim.
The pilots' union at
, parent of American Airlines, the world's largest airline, said Wednesday that the company is looking to furlough 1,000 pilots, on top of the 1,078 already on leave. The latest cuts are part of American's campaign to trim costs by $4 billion, or join rivals USAirways and
, parent of United Airlines, in Chapter 11.
The woes continued at UAL as well, as the company said Wednesday that it lost $367 million during the month of February. It added that the war would hurt earnings and cash flow going forward. With losses mounting in March and with bookings uncertain due to the war, the chances that UAL will be in violation of its debtor-in-possession agreements increase -- and so do the odds that it could be forced to liquidate.
joined the warnings parade, reportedly saying it expects to post "significant" first-quarter and full-year 2003 losses. The carrier made the warning in a proxy statement filed with the Securities and Exchange Commission,
Meanwhile, Jim May, president and chief executive of the ATA, said in a conference call Wednesday, "As unfortunate as the declines in actual traffic were
in the first week of war, when you look ahead 60 or 90 days, there is even more bad news. According to the data we've gathered, domestic bookings are off 20% going forward, and international bookings off well over 40% in some regions. On some days, some carriers are reporting more cancellations than bookings for the same flights."
Wednesday's ATA warning comes two weeks after the group released a report saying that a war in Iraq would cost the airline industry $4 billion, with traffic levels falling 15% and thousands of jobs being cut. To combat the effects of the war, the airline industry has been lobbying Congress for relief, proposing a plan for $9 billion in tax cuts, elimination of security fees and other aid.
But when President Bush unveiled his $75 billion supplemental war budget proposal, the White House didn't include a provision to help the airlines. While many in Congress, most notably Senate Majority Leader Bill Frist (R., Tenn.), have said that some kind of relief is probably in the cards, the ATA gave no signs that such aid was imminent.
"We have been heartened by a number of comments from both sides of the aisle and both sides of the Hill, but I don't think we can say we have any sort of agreement that anything will happen yet," said May. "We're continuing to make our case with Congress."
In a best-case scenario, the Senate would add help for the airlines in with its version of Bush's war-appropriations package, which could cushion the blow dealt by the war effort. But if the airline aid doesn't make it into the war-appropriations bill, the airlines would have to wait for Congress to draft, debate and ultimately pass legislation -- a process that could take months as the airline industry hemorrhages cash, cuts jobs and eliminates flights.
Wednesday's somber news in the industry followed an announcement from
Delta Air Lines
on Tuesday, when the nation's third-largest carrier said its first-quarter loss would be equal to or worse than the year-ago quarterly loss of $2.90 a share, excluding all items. Going forward, Delta CEO Leo Mullin said the company will post losses for 2003 and that the airline industry won't recover until 2004, at the earliest.
On Wednesday, many of the major carriers reversed early gains in reaction to the ATA's report. American dropped 3.1% to $2.18, while Northwest fell 3.1% to $4.83. UAL was unchanged at 85 cents. Delta gained 1.4% to $9.95, and Continental inched up 0.9% to $5.89.