Airlines Pounded by Stormy Market’s First Day
Airlines are cutting flights, laying off workers and enforcing new, tougher security measures in an effort to absorb losses taken last week, and anticipate lower levels of traffic and keep passengers in the air.
Shares in a Tailspin
Shares of airlines were surely at the controls as the Dow Jones Industrial Average plummeted a record 684.81 points, to 8920.70 Monday. It is the first time the Dow has been below 9,000 since the fall of 1998.Shares of American Airlines (AMR), Delta (DAL), Northwest (NWAC), US Airways (U), Continental (CAL) and United Airlines (UAL) all declined more than 35% in the day’s trading. US Airways led the way with a 52.1% decline.
The decline equated to a $11.6 in market value in the session. American, the world’s largest airline company, fell $11.71 per share. Discount airline Southwest (LUV) fell 23.8% or $3.57 per share.Shares of European carriers have slipped 32% in the days since the attacks, while Asian airlines are off 21%. The total losses amount to $17 billion.
Trying to Pull Up
After being shut down for about 48 hours, U.S. airlines are tallying up their financial losses. An article in the Wall Street Journal said that the industry may have lost nearly $1 billion due to cancelled flights, lower numbers of passengers and the cost of enforcing new government safety guidelines.Several airlines could be facing bankruptcy as losses mount. Even before the attacks of Sept. 11, only Continental and Southwest were forecasting profits.
Continental said Saturday that it is furloughing 12,000 employees and will stop service to 10 cities, Bloomberg reported. Similar moves could leave 100,000 airline employees out of work and 750 passenger jets on the ground, according to the Wall Street Journal.
On Monday, Spirit Airlines announced it would operate a reduced schedule and lay off as many as 800 workers.
US Airways said it would reduce its flight schedule by 23%, and cut as many as 11,000 jobs.
One airline, Midway, has already been pulled under by the fallout from the attacks. It announced it was ceasing operations Wednesday; just one day after terrorists crashed hijacked passenger aircraft into the World Trade Center and the Pentagon sending the airline industry into a full-scale panic.
Several other major carriers have slashed the number of flights by 20%, others are laying off workers and all are looking for more cash by tapping into their existing credit sources.
Northwest, American, Delta and United Airlines all announced service cutbacks of at least 20%.
(Click here for the full US Airways press release.)
(Click here for the full Continental press release.)
Looking to Governments for Help
Airlines from all around the world are looking to their governments for help through the anticipated tough times. Bloomberg is reporting that losses this year, in large measure due to the tragedies of Sept. 11, could far exceed the $4.8 billion the industry lost in 1992 – a record.Analysts have predicted the industry could lose between $4 billion and $10 billion this year, the Associated Press said.
The industry is expected to look for a $10 billion to $20 billion handout from the government to keep running, the AP reported.
There is currently a $15 billion financial aid package before Congress for the U.S. airline industry. The package is a combination of $2.5 billion in direct aid and $12.5 billion in loans and credit, according to Bloomberg.
Legislators may make the airlines take more steps to help themselves before they get a bail out package. Sen. Fritz Hollings (D – S.C.), chairman of the Senate Commerce Committee, indicated that the airlines shut trim executive salaries and loosen their monopoly-like grip on the nation’s major airports before expecting to receive more money from the government, according to the AP.
Canadian and European Union officials are considering bail out packages for their airlines as well. Air Canada was grounded for two days following the attacks, putting losses in the millions, Bloomberg reported.
The news service reported that Air Canada was also facing a third quarter loss in addition to cutting service to the U.S. by 20%.
The European Commission, which for years has tried to back away from government subsidies for airlines, has not ruled out the possibility of extra money for the industry in the wake of the attacks.
Security Tightens at Nation’s Airports
Long lines, thorough searches and emptier terminals and skies are typical of the post-attack airline industry. The Washington Post reported that Baltimore-Washington International Airport, which normally handles an average of 750 flights daily, only dealt with 541 arriving or departing airplanes.New Federal Aviation Administration regulations have barred curbside check-in, off site check-in and imposed a greater law enforcement presence in airports. Passenger airlines have also been barred from carrying mail and other freight on commercial flights.
Washington, D.C.’s most convenient airport, Reagan National Airport, remains closed according to the Post. The airport is staying closed because of government concerns over its proximity to the White House, Capitol and other major government buildings, the Post reported. The airport is just a few miles from the Pentagon, one of the targets in the attacks of Sept. 11.
