Something Anxious In The Air


Airlines Look For More Federal Cash…

The clouds just refuse to lift for the struggling U.S. airline industry. Skyrocketing jet-fuel prices, piled-up security costs, escalating insurance premiums, self-help efforts that focus on lower prices, possible war, and no sunshine in sight. On Monday, the Air Transport Association (ATA) said if war against Iraq begins, the airlines will need more federal help, including tax relief, security aid, and a release of oil reserves. ATA President James May told Bloomberg News this week, “We’ve got to see some kind of short-term relief … We anticipate it’s got to come shortly after the war begins. If it comes with a significant delay it may not be of any help.” A report released this week by the ATA confirmed that the airlines are in deep trouble already — airline passenger revenues grew a bleak 2.4 percent in January compared to January 2002. “With the threat of war looming, it has been difficult to recover the traffic lost after the 9/11 attacks,” said ATA Chief Economist David Swierenga. In other words, the airlines are too close to the brink of bankruptcy to wait. The airlines are afraid that energy costs will rise at the same time passenger traffic will decline. United Air Lines officials told a bankruptcy court on Monday that they might close down their hubs in Los Angeles, Denver, and Washington, in their desperate effort to cut back and find a profitable position.

…As Crews Cling To Hard-won Gains…

Flight crews and ground-support workers at the airlines are feeling the stress as management looks for all possible ways to cut labor costs. Pilots at US Airways are laying the groundwork for a potential strike, union leaders said Monday. “We have no choice but to consider it,” one official from the US Airways unit of the Air Line Pilots Association (ALPA) told Reuters. Under the airline’s plan, some pilots would lose up to 75 percent of the retirement benefits they are owed. At United Air Lines, union officials reiterated this week their strong opposition to the company’s effort to start a discount carrier. On Monday, ALPA Chairman Paul Whiteford wrote to United’s CEO: “We are fundamentally and unequivocally opposed to any separate airline entity within United that operates under a separate labor agreement, seniority list or corporate structure.” The one ray of sunshine, amid all this gloom: The pilots of Spirit Airlines, based in Fort Lauderdale, Fla., announced Monday they won a four-year contract with 20-percent wage hikes in the first year, improved vacation and sick time, and other enhanced benefits such as better coverage for moving expenses. “We’re very happy with this new contract,” said David Sytsema, a union official. “We believe that it represents our pilots’ best interests and we commend Spirit management for its ability to recognize the value we provide to our organization.”

…And Woes Ripple Through The Industry

As the airlines struggle, the economic crunch trickles down to suppliers. Boeing has loaned billions of dollars to its airline customers, The Seattle Times reported Monday, and now faces exposure to huge losses as those borrowers face possible bankruptcy. The fears of a Middle East war are not only a problem for domestic air travel, but also will affect the business of European and Asian airlines, many of which fly Boeing airplanes. “A war in Iraq would send passenger levels [worldwide] plummeting by 15 percent to 20 percent,” Giovanni Bisgnani, chief executive of the International Air Transport Association, predicted earlier this month, the Times reported. On the upside for Boeing, the company’s new 777-300ER took off for its first flight on Monday, powered by two GE90-115B engines, the largest ever used on an airliner. The successful flight was broadcast live on the Internet; you can watch the video now.