Airline crisis isn't as deep as feared on Sept. 12

Except for USAir, carriers show signs of faster recovery

January 27, 2002|By Paul Adams | Paul Adams,SUN STAFF

Like a lot of furloughed airline employees, Parkville resident Aaron Bocknek hears the job rumors.

With traffic slowly returning, many airlines are beginning to recall employees let go after the Sept. 11 terrorist attacks. The news trickles out in newsletters and e-mail exchanged within a network of unemployed airline workers, many of whom have found it difficult to find work outside the industry.

"I am looking for work, even though I heard rumors that I could be recalled as early as June," Bocknek said.

For now, all he can do is surf the Internet for job postings and tend to his hobby of restoring vintage household appliances. But if recent trends are any indication, the rumors about recalls may soon prove true.

Five months after they went before Congress to secure a multibillion-dollar rescue package, the nation's airlines are predicting that traffic and employment will rebound faster than many anticipated on the morning of Sept. 12.

The situation has improved enough that some analysts say the airlines oversold their troubles after the terrorist attacks and that the number of airline employees who lost their jobs will be significantly smaller than the 94,000 reported by the Air Transport Association, a trade group representing major airlines.

Though profits are still scarce, several large carriers have modestly scaled back plans to furlough thousands of workers and some have begun to bring back employees sidelined in recent months.

It may still be up to two years before all affected workers are back on the job, analysts said. But for the first time in months, there is reason for Bocknek and others to be optimistic.

"I think that the airlines in part were hollering wolf based on their levels as of October," said Morton Beyer of Morton Beyer and Agnew Inc., an aviation consulting firm in Arlington, Va.

Laying off unionized airline workers is an expensive and tricky business, he said. Schedules have to be juggled, employees have to be relocated and retrained - especially the thousands of pilots who were bumped up to new aircraft after colleagues departed.

"I think you'll find in actual practice that the reductions have been far less than predicted," he said.

Fourth-quarter earnings reported last week bolster that view. While losses are in record territory, earnings among several major carriers exceeded most Wall Street estimates.

And some analysts forecast a return to profitability by the middle of this year for some carriers. The exception so far has been Arlington, Va.-based US Airways Group Inc., which reported a larger-than-expected $1.01 billion fourth-quarter loss. Many analysts also look for UAL's United Airlines to report a huge loss this week.

"I think the Street over-reacted a little bit," said Jon Ash, a Washington aviation consultant, referring to Wall Street's predictions of a slower recovery. The situation is nowhere near as bleak as many predicted a few months ago, he said.

Thanks in part to deep discounting at the expense of profits, passenger traffic among major carriers was off less than 14 percent last month compared with December 2000 - a significant improvement over the 20 percent year-over-year decline in November and 26 percent decline in October. Airline furloughs have diminished as traffic has increased, Ash said.

"I think when push comes to shove - in terms of actual head count - I think that number is going to be far less," he said. He estimates a loss of 60,000 to 65,000 positions.

Such forecasts contrast with industry testimony before Congress in late September, when airline executives warned of a cash crunch that threatened to topple the industry.

Testifying on behalf of the Air Transport Association, Leo F. Mullin, chief executive of Delta Air Lines, said the industry expected traffic to grow to 60 percent of what had been previously projected by December and just 75 percent of what had been forecast by the end of the first quarter 2002. Faced with an unpredictable situation, major carriers announced plans to cut staff and flight capacity as much as 20 percent.

Congress responded to the crisis by approving a $5 billion cash infusion and promised $10 billion in government-backed loans. Though most carriers plan to avoid the loans, proponents say the guarantees gave financial markets a needed psychological boost.

Though some of their early estimates were off, ATA officials say the assistance provided was in keeping with the industry's losses, which are expected to reach $7 billion to $8 billion for 2001. Before Sept. 11, industry economists expected major carriers to lose more than $3 billion as a result of the slumping economy a drop in business travel.

"It [the industry's outlook] is a little rosier than our base case [in September], but it's not better than what we asked Congress for," said John P. Heimlich, director of economic and market research for the ATA.

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