- The Washington Times - Tuesday, November 13, 2001

DALLAS The timing of yesterday's crash of an American Airlines jet in New York could hardly have been worse for the world's biggest carrier, which was beginning to see passengers return after the September 11 terrorist attacks.
The damage to American's already troubled business could hinge on whether the crash was due to mechanical failure or an act of terrorism.
Brian Harris, an analyst with Salomon Smith Barney, said the crash is likely to lead some passengers to avoid American for about six months, based on patterns after other recent accidents.
Another attack, analysts said, would strike much deeper fear into travelers, compounding the airline industry's financial problems.
There was no word on possible cause an investigation could take months although the Federal Aviation Administration said there was no indication of terrorism.
Standard & Poor's said it was continuing to watch American's credit "with negative implications."
The rating agency said, however, that American's parent, AMR Corp., doesn't face a short-term liquidity problem because it had $2.3 billion in cash on Sept. 30 and $8 billion of unsecured aircraft it could use as collateral to borrow more money.
AMR already has shored up its balance sheet with more than $500 million in federal and plans to cut capital spending by $2.5 billion. The company eliminated about 20,000 jobs at American, TWA and American Eagle.
The carrier still posted a $414 million third-quarter loss, the largest in its 75-year history.
U.S. airlines lost a collective $2.4 billion in the third quarter and announced 100,000 layoffs.
"Today's news comes at a difficult time for the nation, a difficult time for the airline industry and a very difficult time for American Airlines," said American's chairman and chief executive, Donald J. Carty.
"Given the changed world we live in today, it will be as important as it has ever been to quickly and to accurately determine the cause of this accident," Mr. Carty said.
Airline stocks, which have plunged 40 percent since Sept. 11, sank yesterday on the news.
Shares in AMR tumbled 17 percent before recovering somewhat to close at $16.49, down 9 percent, or $1.64, on the New York Stock Exchange.
Shares of No. 2 United's parent, UAL Corp., slipped 59 cents to $10.33; shares of Delta fell $2.72, or 10 percent, to $23.27; and Continental was off $1.60, or 9 percent, to $16.
Across the industry, there were faint signs of recovery in recent weeks. Occupancy on jetliners was slowly recovering although most carriers scrapped about one-fifth of their flights.
But the carriers were staggered again yesterday by news that an American jet with 255 persons aboard crashed shortly after takeoff from John F. Kennedy International Airport.
"This is bad news for AMR any way you cut it," said Ozarslan Tangun, an analyst with Southwest Securities. "People are scared to fly because of terrorism as it is, and if a flight goes down because of a mechanical problem, they'll be afraid to fly with American."
Susan Donofrio, an analyst with Deutsche Banc Alex. Brown, said the crash could put a chill on recent gains in airline traffic and even push some smaller carriers, such as America West, out of business.
Surviving airlines also could face higher insurance costs, although there will be a push to have the government pay the increases, as it has since Sept. 11, Mr. Donofrio said.
Insurance, however, accounts for less than 1 percent of carriers' costs, she added.
The crash rattled American's employees, who were still mourning the deaths of crew members aboard two planes that were hijacked and crashed on Sept. 11.
"A lot of us had a lot of friends on this flight. This hit home big time for me. It's worse than you can imagine," said Leslie Mayo, a 15-year airline veteran and spokeswoman for the carrier's flight attendants' union.
At American's headquarters near Dallas-Fort Worth International Airport, signs taped to cafeteria and bathroom doors told employees of meetings in which they could express their emotions.
Miss Mayo said it was a difficult day to think about work, but there were also words of sympathy and support.
"We've already received letters from other unions and from passengers this morning. People are amazing," she said.


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