Airlines Finances

Delta Air Lines on Thursday agreed to purchase a major portion of Pan American World Airways, including all of its European routes and its lucrative Northeastern shuttle, in a deal worth about $260 million. Once the deal is consummated, Delta will rank with United Airlines and American Airlines as among the largest carriers in the world.

When United Airlines recently chose John Creighton Jr. as chief executive, after his predecessor quit under fire, United's powerful unions quickly said they would work with him to help the ailing airline stem its massive losses. United then also was running television ads that, in cleverly combining the carrier's name with the national mood, featured employees saying, "We're united."

A Japan Air Lines' plan to start hiring contract flight attendants at half the pay of full-status employees has stirred a new controversy here over government intervention in private business. The battle--unusual only in that it has gone public--is not over yet. But signs are pointing to a victory for business. It started in August, just as JAL was about to interview applicants for jobs as contract flight attendants.

The Swiss parliament approved the government's $1.2-billion contribution to a rescue package for part of national airline Swissair Group, which filed for bankruptcy protection last month. Both houses backed the plan to save as much as two-thirds of Swissair's fleet by shifting it to regional carrier Crossair. The assembly met for an extraordinary two-day session after the government stepped in last month to forestall the airline's collapse.

Over the years, Texas Air Corp. Chairman Frank Lorenzo has become an enemy to organized labor. But to his friends and admirers, he's been seen as a nimble-footed deal maker, aviation visionary, steely boss. Even a financial genius.

Martin R. Shugrue Jr., a former naval aviator and commercial airline pilot, today begins the toughest mission of his life. As the newly appointed special trustee of Eastern Airlines, he's been assigned to fly the ailing carrier out of its woes.

Disappointed by large losses and weak traffic on international routes, U.S. airline executives might be wondering why they left home in the first place. While airlines have grown quickly overseas, profits have become scarce in the face of stiff competition, a glut of seats and economic weakness abroad. As a result, some domestic airlines have announced reductions in service to Europe and Asia after an aggressive and costly international expansion that began in the mid-1980s.

This is the aviation industry's Forest Lawn. It is a scrubby desert lot strewn with unwanted airliners, grounded by the industry's economic woes. Tick off the names on the fuselages; it sounds like roll call at bankruptcy court: Pan Am. Eastern. Braniff. Midway. The place is called Pinal Air Park. In the 1970s, the county-owned airstrip 35 miles west of Tucson was a secret air base for the Central Intelligence Agency.

In an attempt to exploit travelers' concerns over ailing airlines, a brokerage at Lloyd's of London is developing insurance that would preserve coveted frequent-flier freebies even if a carrier shuts down. The new insurance would allow a defunct airline's frequent fliers to trade their miles for free tickets on another airline, according to John Bell of London's Norex Insurance Brokers. Norex, a member of Lloyd's, is putting together a group to underwrite the insurance.

The airline crisis deepened Saturday as two major carriers, Continental and Northwest, said they will slash their permanent flight schedules by 20% to survive. Continental also furloughed 12,000 employees, or 21% of its work force, and called on Congress for immediate help "to save our industry." Continental, citing a "drastic drop" in passenger bookings and the historic shutdown of U.S.

Within days after Sept. 11, the airlines pleaded for a bailout from Congress because they claimed they otherwise faced insolvency. Yet nearly two months later, not one airline has yet applied for the biggest chunk of the rescue package: federal loan guarantees.

Even though more people are flying again, the airline industry continued to reel Wednesday with American Airlines reporting a record loss and United Airlines' chairman facing calls for his ouster. AMR Corp., which owns Trans World Airlines in addition to American, said that in the three months ended Sept. 30 it lost $414 million, or $2.68 per diluted share, the worst quarterly loss in its history. Two of American's jetliners were hijacked and used in the Sept. 11 terror attacks.

The nation's airlines this week began receiving desperately needed cash from the U.S. bailout. Now, they're ready to tap the other part of the aid: federal loan guarantees. But there are no guarantees that will be enough to keep all the airlines flying. In effect, Uncle Sam could well determine which U.S. carriers survive over the long term and which don't, according to investment bankers, lawmakers and industry analysts.

British Airways, Europe's biggest airline, said Sunday it might sell some real estate to raise cash if losses from terrorist attacks in the U.S. earlier this month widen. The carrier, which is more dependent on North Atlantic routes than rivals, has $1.46 billion in cash to draw on, spokesman Paul Parry said, though its property holdings will provide another cushion if more cash is needed.

President Bush signed a bill providing $15 billion for the airline industry hit by job cuts and plummeting ticket sales since the terrorist attacks on the World Trade Center and the Pentagon. "The terrorists who attacked our country on Sept. 11 will not shut down our vital businesses or thwart our way of life," Bush said in a written statement from his Camp David retreat in Maryland.

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.

When United Airlines recently chose John Creighton Jr. as chief executive, after his predecessor quit under fire, United's powerful unions quickly said they would work with him to help the ailing airline stem its massive losses. United then also was running television ads that, in cleverly combining the carrier's name with the national mood, featured employees saying, "We're united."

British Airways, Europe's biggest airline, said Sunday it might sell some real estate to raise cash if losses from terrorist attacks in the U.S. earlier this month widen. The carrier, which is more dependent on North Atlantic routes than rivals, has $1.46 billion in cash to draw on, spokesman Paul Parry said, though its property holdings will provide another cushion if more cash is needed.

Congress swiftly approved a $15-billion federal aid package for the battered U.S. airline industry Friday while setting up a government fund to compensate the families of victims of the Sept. 11 terrorist attacks. President Bush was expected to sign the measure.

Congressional and White House negotiators reportedly reached agreement late Thursday on a $15-billion airline rescue package. The agreement came as lawmakers were besieged by other industries seeking federal aid for losses suffered after the terrorist attacks last week. Republican and Democratic leaders and the administration agreed on an aid package of $5 billion in cash and $10 billion in loan guarantees, wire services reported. Negotiations continued Thursday on providing some relief for U.S.