Sunday, September 16, 2001

For airlines, bad situation gets worse

Thousands to lose their jobs at Continental

By James Pilcher
The Cincinnati Enquirer

        One of the biggest financial casualties of Tuesday's terrorist attacks may be the nation's airline industry.

[photo] American Airlines workers Marcus Muench and Mandy Loftis help stuff belongings back into a passenger's bag Saturday after a more-stringent search.
(Brandi Stafford photos)
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        The damage reports have already begun trickling in, meaning a drastically changed landscape and the potential for fewer choices in routes and carriers — and higher ticket prices for passengers.

        Saturday, Houston-based Continental Airlines, which operates a hub in Cleveland, said it was laying off 12,000 employees — a fifth of its work force — in anticipation of a decline in air travel following the disasters. It cut 20 percent of its routes.

        Last week, Midway Airlines of Raleigh, N.C., said it was shutting down after a wave of cancellations and refund requests sparked by the disasters. The airline had filed for bankruptcy and was undergoing restructuring before Tuesday.

        American has already said it would resume only 80 percent of its routes. Delta Air Lines — which operates its second-largest hub locally — is shooting for 70 percent and then will think things over, officials say, declining to elaborate.

        “There will be airlines who won't survive this,” says Richard Gritta, a business professor at the University of Portland in Oregon and an airline expert. “They're already looking at losing a half a billion to a billion dollars just because of this, which happened in one of their worst years in memory.”

[photo] A few customers wait for a ticket agent Saturday at Cincinnati/Northern Kentucky International Airport.
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        The airlines have asked Congress for as much as $20 billion in financial aid to help keep themselves solvent, although an initial bill asking for more than $15 billion was rebuffed by the House Saturday. In comparison, the federal government guaranteed $1.5 billion in debt for Chrysler in 1979 to help it survive.

        “The airline industry is in some real difficulty,” said House Minority Leader Richard Gephardt, D-Mo.

        Airlines were already projected to lose as much as $3 billion this year combined, the result of a drop in business and higher labor and fuel costs. That would make 2001 the airlines' worst year since 1992, when they lost $4.5 billion in the wake of the Gulf War.

Long lines, longer delays

        The industry's finances aren't the only aspect of flying that will probably be changed for the foreseeable future, if not forever.

        Passengers who have already faced tighter security after the attacks might see even more measures.

        “Travel as we know it will never be the same again,” says David Stempler, president of Air Travelers Association, a Washington-based passenger lobby.

        After Tuesday's attacks, renewed calls surfaced for the standardization of airline and airport security.

        Currently, each airport and airline files its own security plan with the Federal Aviation Administration. Airlines also handle security at public and even private checkpoints. At some airports, different terminals use different security firms, depending on the airline.

        “There are literally nearly 1,000 different security standards out there,” says Mary Schiavo, former inspector general of the U.S. Department of Transportation and an aviation professor at Ohio State University.

        FAA and airline officials have not commented on current security protocols.

        There have been security enhancements put in place already, such as a ban on curb-side check-ins, greater scrutiny at checkpoints and making gated areas accessible only to ticketed passengers.

Fewer routes, carriers?

        Longer lines at security mean the airlines will probably be operating fewer flights, because they'll have a harder time keeping their current timetables.

        Fewer routes means less revenue. If airlines are called upon to beef up security, that could mean higher ticket prices.

        “It couldn't have come at a worse time, because if you raise prices and don't convince people it's safer, they'll just not fly,” Mr. Gritta said.

        The government could pay for many security improvements, and even create a separate agency to oversee everything from perimeter security to watching X-ray machines.

        Experts say the airlines may fight some security changes, saying they couldn't afford them and that the American public doesn't want to travel under such restrictions.

        “We're going to see just what the public will accept after they've seen probably one of the worst things that ever has happened in aviation,” Mr. Gritta says. “How much extra they are willing to pay and how much loss in convenience they are willing to endure — that's the $64 question.”

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