- The Washington Times - Friday, October 19, 2001

Shares of major U.S. airlines continued falling yesterday amid reports of possible anthrax on airplanes, an airport bomb scare and gloomy predictions from industry executives.

UAL Corp., parent company of United Airlines, led the downturn after a warning from its chief executive officer that the company could go out of business unless customers return quickly. The company's stock value plummeted about 11 percent to close at $15.05 yesterday after Chief Executive Officer James Goodwin delivered the warning to employees in a letter mailed this week.

"Clearly, this bleeding has to be stopped and soon or United will perish some time next year," Mr. Goodwin said.

The company's costs exceed revenue at four times levels before the Sept. 11 attack on America, he said.

America's airline problems are spilling into the international airline industry. The head of the International Air Transport Association said Wednesday that airlines worldwide are on course to lose as much as $12 billion this year because of the Sept. 11 attack. As much as $5 billion of the losses would come from the U.S. domestic market.

"We may see more restructuring going on in this industry," Pierre Jeannoit, IATA director general, told reporters at an aviation conference in Atlanta. "The possibilities of bankruptcies exist."

The first quarterly reports yesterday from major U.S. airlines showed sharp drops in revenue after Sept. 11. Even discount carriers with the industry's most reliable earnings were hurt.

Southwest Airlines reported an 18 percent drop in third-quarter earnings but still managed to make a profit. The company earned a $151 million profit on revenue of $1.34 billion, down from $1.48 billion a year million profit on revenue of $1.34 billion, down from $1.4 billion a year ago.

Alaska Airlines, the nation's ninth-largest air carrier, reported a third-quarter profit of $7.3 million, compared with a $15.9 million profit a year earlier.

Although most other airlines have not yet posted third-quarter earnings, the trend is lower.

Northwest Airlines Chief Executive Officer Richard Anderson told employees the airline is recovering only its lowest-fare customers, but not enough to pay its expenses.

"While our load factor is rising, it is not enough to cover our operating costs," Mr. Anderson said. "Most of the rebound we have seen is in the lower-yielding leisure markets. It's very important that we continue to see a rebound in both leisure markets and in business markets."

Stocks for all major airlines, except Southwest, are now rated as junk bonds by Moody's Investors Services. Commercial airlines such as American Airlines the world's largest as well as Delta Air Lines Inc. and United suffered 11 investment rating downgrades in the third quarter on $70.4 billion of debt, which will make it harder for them to get loans to help with their recovery.

Boeing Co. reduced its estimate for 2002 earnings by $6 billion, to $56 billion. The company reported the lower projected earnings even as it reported good news that it posted a 7 percent profit increase in the third quarter.

The company expects to deliver as few as 350 airplanes next year, down from an estimated 522 this year.

The best outlook from the airlines is for their customers. United, Delta, US Airways, Continental and TWA are among airlines that are doubling frequent-flier awards and discounting miles needed for round-trip flights, at least through Nov. 15.

Copyright © 2018 The Washington Times, LLC. Click here for reprint permission.

The Washington Times Comment Policy

The Washington Times welcomes your comments on Spot.im, our third-party provider. Please read our Comment Policy before commenting.


Click to Read More and View Comments

Click to Hide