- The Washington Times - Saturday, October 19, 2002

The airlines are carrying lots of baggage these days; it's just the wrong kind.
Business travelers continue to spend less. Pension and security costs are rising. Debt is growing. And the perceived aggravation of flying is propelling many travelers to drive or take the train for shorter trips.
So, with a dismal third quarter behind them and the immediate future looking grim, major carriers are shrinking operations again. They are unloading employees, real estate and aircraft as part of an effort to stanch the billion-dollar losses that have dragged their stock prices to historic lows.
"To the extent that anyone thinks large network carriers have been waiting for passengers to return, the announcements and actions taken in the last week should dispel that completely," said David Treitel, chairman of New York airline consultancy SH&E; Inc.
In the past week, Delta Air Lines said it would lay off as many as 8,000 employees, American Airlines said it would delay delivery of 34 jets through 2005 and Northwest Airlines said it would close a maintenance center and several ticket reservation offices. American announced in August that it would cut its payroll by 7,000.
Industry consultants expect that before the year is up more layoffs will be announced and that major carriers will be forced to further pare the number of short-distance flights, especially in smaller markets.
"Every carrier has seen traffic in the short hauls just go away," said Robert Mann of R.W. Mann & Co., a Port Washington, N.Y., consultancy.
The latest wave of cost-cutting came as the nation's largest airlines racked up roughly $2.2 billion in third-quarter losses, putting the industry on pace to lose $8 billion for the second year in a row. US Airways was forced into bankruptcy two months ago, and other carriers are desperately trying to avoid the same fate.
"It's certainly more than a bit discouraging as an equity analyst when the most frequently asked question is, 'What airline is going bankrupt next?' And when the follow-up is, 'No, I meant after United?'" Samuel Buttrick, a UBS Warburg analyst, said in a recent report.
For all the clouds hanging over the industry, analysts found some bright spots within the latest round of earnings reports:
Southwest, which earned $75 million, said it would increase capacity by 5 percent in the fourth quarter.
Northwest, which lost $46 million in the July-September period, was praised for maintaining strong liquidity. It had $2.4 billion in cash on hand at the beginning of September, according to Salomon Smith Barney.
Continental, which lost $37 million, was credited with efficient operations, reducing its cost per seat by 4.7 percent compared with last year
But the industry tea leaves mostly foretell gloominess.
"In our view, one of the largest uncertainties hanging over the sector includes underfunded pensions," said Brian Harris, a Salomon Smith Barney analyst.
In 2003, Delta will have to spend as much as $250 million in cash and take charges of as much as $300 million to deal with the problem, Mr. Harris said. Other carriers face similar, if less severe, situations.

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

The Washington Times Comment Policy

The Washington Times is switching its third-party commenting system from Disqus to Spot.IM. You will need to either create an account with Spot.im or if you wish to use your Disqus account look under the Conversation for the link "Have a Disqus Account?". Please read our Comment Policy before commenting.

 

Click to Read More

Click to Hide