United, Northwest to cut jobs, flights

U.S. airlines could lose billions because of war

War In Iraq

March 22, 2003|By Paul Adams | Paul Adams,SUN STAFF

United Airlines and Northwest Airlines said yesterday that they will cut thousands of jobs and eliminate hundreds of flights, in the latest sign that the airline industry stands to lose billions of dollars as many travelers opt to stay home while war is waged in Iraq.

Northwest, the nation's fourth-largest airline, said it will lay off 4,900 and cut capacity by 12 percent in response to reduced bookings. United, the nation's second-largest, plans to cut its schedule by 8 percent and temporarily furlough about 3,500 mechanics and flight attendants, labor leaders said.

Those announcements followed news yesterday that Hawaiian Airlines, the nation's 12th-largest, would join US Airways and United in bankruptcy.

This week, Continental Airlines said it would eliminate 1,200 jobs, and several other carriers said they will cancel some overseas flights in response to the war.

Airlines and travel booking services report a 10 percent to 20 percent decline in demand since the bombs started to fall over Baghdad, prompting many carriers to waive rescheduling fees for travelers who delay travel.

"This week alone, we have seen a 20 percent fall-off," said David Castelveter, a spokesman for US Airways, the nation's seventh-largest carrier. Bookings were down 40 percent Wednesday, the day war broke out, he said.

The latest blow to the industry comes after major airlines have collectively lost about $18 billion since the Sept. 11, 2001, terrorist attacks. Analysts say more bankruptcies could follow as the crisis deepens, with many predicting that American Airlines, the world's largest, could be the next victim. United has said it may face liquidation unless its labor unions agree to a huge package of pay cuts.

In a recent analysis, the Air Transport Association estimated war could result in up to $4 billion in additional losses for the nation's biggest airlines, which were already projected to lose $6.7 billion in 2003. The trade group says the most likely war scenario has airlines eliminating 2,200 daily flights and 70,000 jobs on top of the 100,000 that have already been cut since Sept. 11, 2001.

"The notion of domestic terrorism fears combined with war is expected to drive down domestic passenger numbers as well as international, which is something we didn't necessarily see in the last [gulf war]," said Michael Wascom, a spokesman for the association, which represents major airlines.

The phones have all but gone dead at area travel agencies. Kevin Abell, president of Roland Park Travel, has seen business sag as a result of war jitters, terror alerts and a sluggish economy. "We're dying on the vine," Abell said. "People are very anxious and we've had a number of cancellations."

Dianna Boucher, 42, an office administrator, is typical of what the travel industry is up against. Boucher and two companions are scheduled to fly to Hong Kong on May 13 for a two-week vacation. With war on the horizon, one decided to stay home to be close to family. Boucher and the third companion decided to press on.

"We were all in Vienna on Sept. 11 [2001] and we survived that," she said. "I decided I'm not going to let them [terrorists] change my life."

But when news spread that a mysterious respiratory illness is sweeping Asia, Boucher and her remaining travel partner began to waver. The pair are leaning toward continuing with their plans, but are putting off a decision until at least next week.

Such anecdotes are one reason airlines have decided to be lenient in allowing passengers to postpone travel without incurring financial penalties. Orbitz, the online booking service, also has liberalized its exchange policies in light of the war and terrorism alert.

"What we've seen in the last week is a sharper drop-off in international bookings," said Carol Jouzaitis, a spokeswoman for Orbitz. Overall, bookings are down about 15 percent this week, she said.

In one bright spot, analysts said some low-fare carriers stand to gain market share as their competitors cut flights. Southwest Airlines, the dominant carrier at Baltimore-Washington International Airport, said it doesn't plan to reduce flights as a result of the war. The nation's sixth-largest airline, which has remained profitable, is the only major carrier that didn't announce cutbacks after the Sept. 11 attacks.

"I have been told that if current trends continue, we should be profitable in the first quarter [of 2003]," said Christine Turneabe Connelly, a spokeswoman for Southwest.

US Airways, which hopes to emerge from bankruptcy in nine days, said it is evaluating whether to cut flights as a result of the war. In its most recent contract negotiations with unions, the airline won the right to cut pay by 5 percent across the board in the event of a war or terrorist attack. So far, it has not done so.

Delta Air Lines, the third-largest carrier, also is flying a full schedule, despite a noticeable drop in demand. The airline said it is watching the situation closely.

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