US Air plan to cut MetroJet would deliver blow to BWI

Airline's move comes as U.S. leaders agree on $15 billion aid plan

Terrorism Strikes American

President Bush Speaks

September 21, 2001|By Paul Adams | Paul Adams,SUN STAFF

In a move that will have major ramifications for travelers in Baltimore, US Airways Group Inc. has told pilots it plans to eliminate all of its MetroJet fleet as part of a cost-cutting plan, potentially resulting in the loss of 49 of the airline's 75 daily mainline jet flights out of Baltimore-Washington International Airport.

The news comes as the White House and Congress agreed early today on a $15 billion plan to financially bolster the airline industry in the aftermath of the terrorist attacks that has threatened the survival of some airlines.

The House is expected to approve the package, which also provides some liability protections for the airlines, later today, and the Senate was expected to swiftly follow suit.

Of US Air's action, analysts say the action is clear evidence that BWI will bear the greatest burden as the struggling Arlington, Va.-based airline prepares to eliminate 11,000 jobs and reduce its flying capacity by 23 percent with the grounding of at least 102 planes. In addition to the loss of hundreds of aviation jobs in the Baltimore area, the elimination of MetroJet will mean the loss of one of the low-cost competitors that has made BWI the region's fastest-growing airport and a destination for passengers seeking cheap travel.

"Our total presence in Baltimore will be a mere shadow of what it was," said Mark Thorpe, a spokesman for the US Airways unit of the Air Line Pilots Association, which expects to lose 512 of the 677 pilots stationed in Baltimore.

Yesterday proved another punishing day for airline stocks, which plunged on fears that the federal financial aid package will be insufficient to protect the nation's 10 major airlines from serious financial damage in the wake of last week's terrorist attacks. US Airways, the second-biggest user of BWI and the nation's sixth-largest airline, was among those especially hard hit, dropping 21 percent, or $1.20, to close at $4.45 per share. The stock reached a 52-week high of $48 per share in December and was trading at about $12 before Sept. 11.

Analysts have said that US Airways is among the most vulnerable to bankruptcy as a result of a precipitous drop in passengers combined with last week's two-day shutdown of the nation's airports.

Transportation Secretary Norman Y. Mineta added to those fears yesterday by warning that a major airline would "go under" if Washington's Ronald Reagan National Airport was not reopened in 10 days. The statement is widely believed to be a reference to US Airways, which operates about 45 percent of all flights out of National. National is the only airport that remains closed and is home to US Airways' most lucrative routes, including the Washington-New York shuttle.

"I think that is probably a genuine statement," said Barbara Beyer, an aviation consultant with AVMARK Inc. in Arlington. "Mineta is a sharp guy, he's one of the few recent transportation secretaries who really does understand transportation, and US Air is just so involved at Reagan. I would guess it's more than 10 percent of their revenue."

Like the rest of the industry, US Airways continues to bank on salvation in the form of federal aid.

The package agreed on early today includes $5 billion in direct grants and $10 billion in loan guarantees.

Under the plan,additional $3 billion would help pay for security measures and come from a $40 billion disaster assistance measure approved by Congress.

Even with the federal bailout, Beyer gave US Airways long odds on surviving the crisis, which comes just months after the airline's proposed $12 billion merger with United Airlines was rejected by federal anti-trust officials.

US Airways has remained tight-lipped about its plans to cut costs. A spokesman for the airline said yesterday that it has not announced which positions will be eliminated and which routes will be discontinued. News of the pilot cuts were exposed in the airline's posted pilot bid schedule, which revealed the plans to eliminate the MetroJet fleet and at least two other classes of airplane. The MetroJet cuts will occur in December, the pilots said.

Analysts gave US Airways positive marks for eliminating MetroJet, the low-cost "airline-within-an-airline" created in 1998 to compete against low-fare leader Southwest Airlines, which remains BWI's biggest user with more than a third of the market. Before last week, US Airways accounted for about 30 percent of BWI's nearly 20 million passengers annually.

The 49 Boeing 737-200 aircraft that constitute MetroJet's fleet are among the least fuel efficient and are costly to operate, analysts said. Also, US Airways was never able to reduce MetroJet's costs enough to be a viable competitor against Southwest, which has the lowest operating costs in the industry. At an analysts' meeting in New York on Aug. 15, US Airways chief executive Rakesh Gangwal hinted that MetroJet could be on the chopping block if its costs were not reduced.

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