Businesses feel strain of ban on air traffic

Healthy airline industry is needed to boost economy, analysts say

Terrorism Strikes America


September 13, 2001|By Paul Adams and Kristine Henry | Paul Adams and Kristine Henry,SUN STAFF

Meetings and events were canceled. Thousands of business travelers were stranded nationwide. Packages that absolutely, positively had to get there overnight, didn't.

Despite international resolve not to let Tuesday's terrorist hijackings stand in the way of world commerce, many businesses that rely on commercial aviation to conduct business in Maryland and beyond suffered in ways big and small as the nation's airlines remained largely grounded for a second day yesterday.

Even with the resumption of normal air traffic, many analysts predict a sharp decline in air travel that could change the way America does business for weeks or months to come. And the effects of a nervous flying public, flagging consumer confidence and a struggling aviation industry could ripple through an already weak economy, contributing to recessionary pressures that will hurt businesses regardless of whether they rely on air transport.

"Industry can't grow without a healthy airline industry," said Kevin P. Mitchell, chairman of the Business Travel Coalition, which represents Black & Decker Corp., Procter & Gamble Co., Ford Motor Co. and other major corporations. "The airline industry is the fulcrum across all other industries. If it's not working, companies aren't out there solving problems, building relationships and selling product."

Even before Tuesday, the nation's airline industry was far from healthy. After posting stellar net profit of nearly $5.4 billion in 1999 and a respectable $2.6 billion last year, some analysts estimated recently that major airlines will lose $3.5 billion this year as a result of a nationwide economic slowdown and other factors dragging down profits.

Even setting aside losses from four hijackings and the temporary grounding of the U.S. fleet, aviation experts said yesterday that major airlines will see traffic fall off sharply as nervous passengers wait for reassurances that travel is safe again. A similar pattern has emerged after other air disasters, though there is no precedent for what happened Tuesday.

"The truth is that they're going to financially lose their butts this year," said Darryl Jenkins, director of the George Washington University Aviation Institute.

Regional carrier Midway Airlines, already faltering, became a casualty of the terrorist attacks when it announced yesterday that it would cease operations as a result of the expected drop in travel demand. Some analysts say there are other small, struggling airlines that soon might follow suit.

The depth of the impact on airlines and other U.S. businesses will depend on how quickly travelers regain confidence, experts said. But early indications are that major corporations are not planning to send their employees back into the skies soon.

In a survey of corporations nationwide, the Business Travel Coalition found that, of the 187 companies that responded, the majority planned to curtail travel for at least a week. About 62 percent said they had banned travel for the rest of this week, and 88 percent said they expected employees to unilaterally cut back on travel in coming weeks.

But across Maryland, there were signs that businesses were coping with the tragedy and finding ways to keep the wheels of commerce moving.

"I don't think anybody's going to be mad if you couldn't make a meeting today," said William Corcoran, vice president of public and regulatory affairs for Columbia-based W.R. Grace & Co.

Grace officials sent out a memo yesterday banning all business travel until further notice. The chemical company canceled a sales meeting it was to hold in Annapolis yesterday.

"The good news is we've got teleconferencing, faxes and we can do Webcasts," he said. "There are a lot of tools we have today from a technology standpoint that we did not have 10 years ago."

McCormick & Co. Inc. has suspended all business travel for at least two weeks, except for the employees it has throughout the world who are stranded and trying to get back home.

In boardrooms nationwide, executives are doing a lot of soul-searching with respect to corporate travel, said Charlie LeBlanc, managing director of Air Security International, which advises Fortune 500 companies on domestic and international travel safety. Many of the company's clients are putting off travel indefinitely and are contemplating temporarily moving employees stationed in the Middle East, Indonesia and Northern Africa to countries more friendly to the United States.

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