The September 11th attack
Major carriers to trim 20% of flights
| • | Continental uncertain of layoffs in Hawai'i |
Bloomberg News
CHICAGO — Continental Airlines Inc. will cut flights by 20 percent and lay off 12,000 people to avoid a potential bankruptcy filing after terrorist attacks scared away travelers and raised security costs.
Associated Press
UAL Corp.'s United Airlines and Northwest Airlines Corp. also said they would reduce seat and flight capacity by a fifth following a similar move Thursday by AMR Corp.'s American Airlines, the biggest carrier. Continental will lay off more than 20 percent of its workforce of about 56,000. The other airlines didn't say how many of their workers may be affected by the cuts.
Continental has announced it will furlough about 12,000 employees as a result of the terrorist attacks. Other airlines are expected to follow suit.
"This is what we need to do to stay alive," Chairman and Chief Executive Gordon Bethune said at a press conference. He predicted other airlines will follow Continental's moves, leading to industry layoffs of as many as 100,000 workers.
Bethune called on the U.S. government to provide funding to help carriers through an "unprecedented financial crisis." A House bill introduced Friday would provide $15 billion in direct aid, loans and credit. Losses at major U.S. carriers this year may now exceed the 1992 record of $4.8 billion.
Continental, the No. 5 U.S. airline and, before Tuesday, one of only two big carriers to have forecast a profit for this year, has about $800 million in cash and is losing $30 million a day. Given current loss projections and reduced demand, and without government help and cost-cutting steps, the carrier may have to seek bankruptcy protection by late October, Bethune said.
"We're not going to be bankrupt first, I'll tell you that," Bethune said. Continental will disclose details of the layoffs and flight reductions, including which routes will be affected, this week.
Asian Airlines
European and Asian airlines resumed most flights to the U.S. Friday. After grappling with a backlog of passengers waiting to return to the U.S., companies will have to assess the impact of the terrorist attacks on their business.
British Airways Plc plans to cut 6,000 jobs, ground 15 planes and reduce North Atlantic routes following Tuesday's attack on the U.S., Sunday Business reported, citing unidentified people.
"Even before the tragedy in the U.S. we had been saying the industry is very competitive," said Lisa Wong, a spokeswoman for Cathay Pacific Airways Ltd., Hong Kong's biggest carrier. "Right now, we have no plans to cut anything, but as an ongoing exercise we'll monitor things closely and see how the economy goes."
Malaysian Airline System Bhd, the national carrier, said the U.S. Federal Aviation Administration approved its request to resume flights to the U.S.
The company, which hasn't yet resumed service to New York, said it doesn't plan to cut its 10 weekly flights to the U.S. Singapore Airlines Ltd. said it doesn't plan to cut services.
Other carriers
UAL also called on Congress and the White House to support "the ongoing viability of the industry." United, which typically operates 2,400 flights a day, said the reduction in capacity will allow it to minimize delays related to the new security measures.
U.S. President George W. Bush "is concerned about the economic health of the airlines, and the administration is in touch with airline officials," spokesman Ari Fleischer said.
Northwest, the fourth-largest U.S. airline, told pilots Thursday they should prepare for an unspecified number of layoffs. The St. Paul, Minnesota-based airline, which has about 53,000 employees, said it will complete a review of staffing this week and have the reduced flight schedule in place by Oct. 1.
Other carriers are expected to make similar announcements because the 10 biggest U.S. airlines lost more than a $1 billion in the three-day grounding of all U.S. flights after the attacks, and are collectively losing about $300 million a day now, Bethune said.
AMR, parent of American and TWA, is evaluating how many employees it will need for its reduced schedule, spokesman Gus Whitcomb said.
Congress
U.S. carriers were cleared to start resuming flights Friday, three days after hijackers crashed four jetliners and the Federal Aviation Administration grounded all U.S. flights for the first time. The FAA was tracking 4,375 flights late yesterday compared with 5,000 on a normal day.
Bethune said aid is needed in part because the airlines' financial difficulties would affect other major U.S. companies, such as plane-maker Boeing Co. and avionics maker Honeywell International Inc., as well as hotels and travel agents.
Some House lawmakers will continue to try to help airlines with a proposed $15 billion package of loans and aid, or a similar proposal, after the House returns Wednesday from a recess said Jim Berard, spokesman for Minnesota Democrat James Oberstar.
Oberstar and Representative Don Young, an Alaska Republican, failed to win unanimous House consent to pass the bill early yesterday, hours after it was introduced. Critics said the plan had been formulated in haste and lacked detail.
"We have had no hearings on this," said Representative David Obey, a Wisconsin Democrat.
Demand drops
Continental was flying half-empty planes on only half its scheduled flights, down from more than 75 percent capacity usually, Bethune said. Some companies have told employees to avoid U.S. airlines.
Airlines had already experienced a drop in demand this year as U.S. companies cut travel budgets amid a weaker U.S. economy.
"This was turning out to be a very rough ride for the airline industry even before the events of this past week," said Paul Dempsey, vice chairman at Frontier Airlines Inc. and a University of Denver law professor.
New security measures, such as a ban on curbside check-ins and more thorough inspections of luggage, will hurt the carriers both in terms of revenue and costs. The changes will slow the processing of people and planes at airports, leading to flight cutbacks, while the added security will likely increase equipment, personnel and training costs.
"If the added costs of security are put on the airlines, that could be the straw that breaks the camel's back," said Philip Roberts, chairman of Roberts, Roach & Associates, an airline consulting firm.
Other carriers
United Airlines, the second-largest carrier, planned to fly about 20 percent of its typical U.S. schedule yesterday and 80 percent of its international flights, spokeswoman Ruth Venning said. She declined to say when the airline would resume its full schedule.
"We're just trying to get our operations back to relative normal," she said.
Delta Air Lines Inc., the No. 3 U.S. carrier, operated 60 percent of its schedule yesterday and could not say how many of its regular flights would be operating today or tomorrow.
"This is just a very fluid situation," spokeswoman Janis Logue said.
One small carrier that was already seeking bankruptcy protection, Midway Airlines Corp., said after the attacks that it would cease operations instead of trying to reorganize.
Continental will "temporarily postpone" a plan to sell shares for the first time in its regional subsidiary, Continental Express, spokesman Ned Walker said.
Among the biggest U.S. carriers, only Continental and Southwest Airlines Co. had been forecast to earn profits this year. Continental had been forecast to earn a profit of $1.25 a share according to the average estimate in a Thomson Financial/First Call poll of analysts.
