Tuesday, November 13, 2001

The nation’s airlines face an even gloomier future after an American Airlines flight crashed in New York yesterday. The timing could not have been worse for an industry struggling to recover from the four September 11 hijackings.
Investigators believed all 260 persons aboard the jetliner were killed. Consumer confidence in the airlines will be another casualty, airline analysts said.
“People were nervous to begin with, so they’re going to be even more so now,” said Darryl Jenkins, director of George Washington University’s Aviation Institute.
“This is not good news. Anyone who thought the airline industry might recover quickly, those ideas have been dispelled,” Mr. Jenkins said.
Many Americans have been afraid to fly since the terrorist attacks two months ago, when four hijacked commercial airplanes crashed into the World Trade Center, the Pentagon and a Pennsylvania field.
Major airliners have cut their flight schedules 20 percent and reduced prices. Traffic has increased slowly, and by mid-October, airline traffic was down only 25 percent from a year ago. The number of passengers had fallen 40 percent in the weeks after the attacks.
With Thanksgiving 10 days away, the aviation industry was beginning to hope for a healthy holiday season. But even if investigators determine the crash is an accident, many travelers won’t be willing to resume flying, analysts said.
“There are always going to be people saying this was the result of terrorism, and the government is just covering it up,” said Terry L. Trippler, president of the Trippler & Associates Inc. aviation research group.
If air travel does decline significantly, airlines may begin dipping into the $10 billion pool of guaranteed loans Congress has created as part of an emergency aid package from September 11.
Carriers have been reluctant to use the loans because they essentially would turn the government into an industry stakeholder. One provision of the aid package would allow the government to profit if airlines return to good times.
Lawmakers have made the airlines a priority since September 11. In addition to the guaranteed loans, Congress also has created $5 billion in emergency grants for the airlines.
Legislation that would overhaul airline security also is pending in Congress.
Even before yesterday’s crash, the airlines were facing as much as $10.5 billion in losses this year, according to a report by the General Accounting Office, Congress’ auditing arm. Analysts said that figure is likely to rise because the airlines will have to absorb the costs of rescheduling travelers as a result of the temporary closings of New York airports yesterday.
“Everything matters at this point,” said Jeff Dabbs, an analyst with Kercheville & Co. in San Antonio.
Shares in AMR Corp., the world’s largest airline company and the parent of American Airlines, slid more than 9 percent yesterday. Shares closed at $16.49 on the New York Stock Exchange, down from Friday’s closing price of $18.13. The stock traded at $29.70 on Sept. 10.
AMR also owned two of the hijacked planes that crashed on September 11. American Airlines Flight 11 crashed into the north tower of the World Trade Center, and Flight 77 crashed into the west side of the Pentagon.
Shares of Delta Air Lines lost 10 percent and Continental Airlines slid 8 percent.
European airline stocks also fell, as did shares of European Aeronautic, Defense & Space Co., the majority owner of Airbus SAS, which built the jetliner that crashed yesterday.
Officials could not confirm the cause of the crash near John F. Kennedy International Airport but said it was most likely the result of a mechanical failure.
The impact of the crash on American Airlines’ traffic and the industry in general will depend on the cause of the crash, Standard & Poor’s said. If evidence of terrorism emerges, fewer consumers will fly on the airline, the rating agency predicts.
Because investigations of plane crashes often take a long time to complete, an extended period of uncertainty over AMR could hurt passenger traffic, Standard & Poor’s said.
“Given the changed world we live in today, it will be as important as it has ever been to quickly and accurately determine the cause of this accident,” Donald J. Carty, American Airlines’ chairman and chief executive, said at a news conference yesterday. A company spokesman said the company will give refunds to consumers who are nervous about flying after the crash.
More airlines may merge in an effort to survive the slowdown, said Susan M. Donofrio, an analyst for Wall Street brokerage Deutsche Banc Alex. Brown.
In recent years, federal regulators have blocked the planned acquisition of US Airways Group Inc. by United Airlines, as well as an attempt by Northwest Airlines to gain a controlling stake in Continental Airlines, on the grounds that mergers reduce competition.
“Rather than be faced with job losses as the weaker airlines continue to retrench, Washington may be more open to the idea of consolidation in the industry,” Ms. Donofrio wrote in a report yesterday.
Staff writer Tom Ramstack contributed to this report, which is based in part on wire service reports.

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