Airlines Face Long-Term Retrenchment
Like most everything in America, the airline industry won't be the same for a long time--if ever--after the terrorist attacks that used four U.S. jetliners as deadly missiles.
Within days, the airline business was pushed to the brink of financial ruin. To survive, the industry in a single stroke is erasing one-fifth of its operations, which overall move 650 million people a year and generate $106 billion in passenger revenues.
But the dramatic turn of events goes far beyond money. Consumers went from complaining about surging business fares, flight delays and congestion--and demanding Congress pass a "passenger bill of rights"--to simply worrying about staying alive in the air.
Now many passengers are too afraid or anxious to fly, or fret about the hassles at the ticket counter because of new security rules at the airports. So jets are taking off half empty, and the airlines are slashing their schedules to survive.
As harsh as it sounds, the terrorists unwittingly solved a big problem for the airlines by forcing them to retrench, perhaps permanently. Even before Sept. 11, the industry was in serious trouble because of the weak economy and badly needed to cut costs, some analysts said.
"This forced them to act when they would have been reluctant to otherwise," said Barbara Beyer, president of Avmark Inc., a consulting firm in Arlington, Va. "There were too many employees and too much capacity in the system."
Even so, the airlines are in disarray. They're losing more than $200 million a day as a group, and are staring at perhaps $7 billion in combined losses for the year. Their stocks are in tatters, their credit ratings are being lowered and their insurance premiums are rising. Lenders shut off their borrowing ability, and the industry threatened to seek bankruptcy protection unless it got the federal bailout that includes $5 billion of direct, immediate cash.
In the meantime, their operations are being cut 20% or more and one, Continental Airlines Inc., abandoned service to 10 cities. It's not expected to be the last to drop routes. And as they eliminate 20% of their schedules, they have to strip out at least 20% of their costs--so nearly 80,000 airline jobs have been cut and at least 30,000 more are expected to be eliminated.
'Long-Term Downward Shift'
