The financial devastation hitting the airline industry hit home yesterday as US Airways Group Inc., the second-biggest operator at Baltimore-Washington International Airport, said it will cut about 11,000 jobs and trim its flight schedule by 23 percent.
The cuts put the Arlington, Va.-based airline in step with other major carriers taking drastic measures to deal with an estimated $1 billion in industry losses since last week's terrorist attacks. Airline executives and aviation analysts are predicting mass bankruptcies among U.S. airlines unless Congress acts quickly - as is now expected - to provide the industry with cash assistance and loan guarantees.
With jittery passengers canceling bookings and recession-wary corporations cutting back sharply on travel, many analysts are predicting total losses for the year will range from $5 billion to $10 billion or more, ground 500 to 750 planes and put as many as 100,000 airline employees out of work.
Analysts say the effect of a crippled airline industry would ripple through the national economy. But it would especially hurt the Baltimore-Washington area, which is fueled by the region's three major airports - BWI, Reagan National and Dulles.
"The entire U.S. aviation system is in jeopardy, and without decisive actions, the future of the system, along with its impact on the nation's economy, is imperiled," US Airways Chairman Stephen Wolf said in a statement.
The airline provided no details on which workers would be affected by the layoffs, though the cutbacks will undoubtedly be felt at BWI, where US Airways operates 75 mainline jet flights and 74 express carrier flights daily. Even before last week, analysts anticipated that the airline would curtail its operations at BWI as part of a major restructuring plan.
But the pain is being felt industrywide as airline after airline announces layoffs and service cuts of 20 percent or more. American Airlines, the nation's largest carrier, will announce layoffs later this week, a company official said on condition of anonymity. The exact number will depend in part on the size of the expected federal bailout, the official said. Continental Airlines, the fifth-largest carrier, laid off 12,000 employees, more than one-fifth of its work force, over the weekend.
With the bad news piling up, Wall Street hammered the airline stocks as trading resumed yesterday for the first time since Tuesday's attacks. US Airways, which announced its layoffs after the close, fell $6.05, or 52 percent, to $5.57. Shares of AMR Corp., the parent of American, plummeted $11.70, or 39 percent, to $18.00.Shares of UAL Corp., which owns United, dropped $13.32, or 43 percent, to $17.50. Delta Air Lines plunged $16.61, or 45 percent, to $20.64 a share.
"The stock market is valuing all airline stocks at pretty much liquidation value," said Darryl Jenkins, director of the Aviation Institute at George Washington University.
US Airways, which already has a negative net worth of $1.8 billion and has zero borrowing capacity left, is among the most endangered of the nation's top 10 airlines, Jenkins said. The airline has been especially hard hit in the past week by the closing of Reagan National, where it is the dominant carrier. National is home to some of the airline's most lucrative routes, but it remains closed indefinitely because of concerns about its proximity to the White House, Capitol and Pentagon.
Other airlines on Jenkins' critical list are Continental, Northwest Airlines, America West and AirTran. All five airlines could file for bankruptcy protection within 30 to 60 days without some assistance, he said. The nation's three largest airlines - American, United and Delta - could follow suit within 60 days.
Regional carrier Midway Airlines, which was already under bankruptcy protection, ceased operations the day after the terror attacks, resulting in 1,700 lost jobs.
The one bright spot for BWI is that budget carrier Southwest Airlines, the No. 1 operator at the airport, remains among the healthiest of the major carriers. In theory, the airline could use its huge cash reserves to purchase rivals at fire-sale prices in coming months. But even Southwest will be impaired in its ability to grow, Jenkins said.
Analysts say part of the problem facing the rest of the industry is that airlines are a highly leveraged business, carrying about $26 billion in debt with current cash reserves estimated to be about $9.4 billion. That leaves little margin for a disaster on the level experienced last week. Even before the attacks, the airline industry was expected to lose about $3.5 billion this year as a result of the economic slowdown. Similar airline recessions have historically led to some bankruptcies, which Jenkins and others expect to see even if Congress moves to bail out the industry.