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NATION Airlines will lose billions, analysts say



Published: Fri, September 14, 2001 @ 12:00 a.m.



Industry expected to cut fares to lure travelers back to the skies.

SAN FRANCISCO EXAMINER

The nation's airlines, already suffering losses from the slow economy, are expected to plunge into more financial trouble as consumers cut back further on travel after this week's terrorist attacks.

Airline analysts had predicted prior to the attacks that the airline industry would report losses this year of as much as $2.6 billion, the highest since 1992. Those losses are now sure to grow.

"This incident is going to cost them billions," said Tom Parsons, chief executive of Bestfares.com, a travel services firm, referring to the airlines. "This is something they've never been faced with. And they are already on a downturn."

UAL Corp., the parent of United Airlines, had acknowledged losing $605 million since the beginning of the year and was already on track to lose more than $1 billion, even before Tuesday's catastrophe.

The attack: United Flight 175 from Boston's Logan Airport to Los Angeles, a 767 aircraft, was one of two jetliners that slammed into the World Trade Center. United Flight 93, a 757 en route to San Francisco from Newark, N.J., crashed 80 miles southeast of Pittsburgh.

While no one can say just how much the attacks will ultimately cost the air travel industry, it's clear the two full days of grounded flights nationwide and the expected drop-off in air travel in the immediate future is already taking a toll.

Travel cancellations, the cost of increased security, refunds and a decrease in bookings for the balance of the year are all expected to put additional burdens on the industry.

Cutting losses: Midway Airlines Corp., which filed for bankruptcy protection Aug. 13, finally suspended all flights and fired 1,700 workers Wednesday, giving up on trying to restructure. The airline, based in Raleigh, N.C., said it doesn't have the resources to reorganize if demand plunges.

Many analysts say they expect travel -- especially discretionary trips and nonessential business travel -- to fall during the next few weeks. September, usually a slow month for travel anyway, will likely be significantly slower this year.

Major U.S. airlines already were forecast to lose a combined $2.6 billion this year as companies slashed travel budgets because of the slowing economy, and labor and fuel costs rose. The U.S. airline industry lost $4.79 billion in 1992, according to the Air Transport Association.

Sam Buttrick, an analyst with UBS Warburg, predicted airlines would lose $4.3 billion and would trim their schedules 10 to 15 percent to offset lower revenue from fewer passengers.

"It's unlikely that Midway will be the only airline to cease operations in this environment," Buttrick said.

Bestfares.com's Parsons said a number of airlines were already offering discounted fares to boost passenger loads. He said he didn't think the carriers would cancel sales or hike ticket prices because that would further discourage travelers.

"I do believe the airlines are going to have to continue to offer sales," he said, adding the airlines would likely promote the fares with fewer and more subtle advertisements. "But they [the carriers] will have additional costs. We could see the airlines cut back on flights. They could actually go to layoffs."




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