Attacks shake aviation industry

Posted: Thursday, September 20, 2001

SEATTLE -- Barely a week after terrorists hijacked four commercial airplanes in a terrifying and deadly attack on the United States, the nation's already weakened aviation industry is facing a crisis that includes tens of thousands of lost jobs and billions of dollars in vanished business.

On Wednesday, the parent company of American Airlines, AMR Corp., became the latest casualty when the Fort Worth, Texas-based company said it would lay off at least 20,000 workers.

''This is not a ripple effect,'' said Rep. Jennifer Dunn, whose congressional district in the suburbs east of Seattle includes thousands of Boeing workers losing their livelihoods. ''This is a tsunami.''

The nation's airlines and the companies that supply them already were hurting from a slowing economy that had businesses cutting back on flying and tourists scaling back vacation plans.

Then came the Sept. 11 attack by terrorists using four hijacked Boeing airliners, the government's unprecedented two-day shutdown of the nation's airspace, and strict new security measures for air travel. The stock market tumbled, businesses and consumers feared recession, the president talked of war -- all of which discouraged travel.

Air carriers began cutting back routes and their work forces, and some warned they faced financial ruin. With airlines halting acceptance of scores of new planes, Boeing late Tuesday announced it was scaling back deliveries and laying off up to 30,000 workers by the end of next year.

Analysts warn the repercussions could spread to everyone from parts suppliers to travel agencies.

''It's going to reverberate through the entire system,'' said Paul Nisbet, an aviation analyst with JSA Research.

''We were having a slowdown, but it was a controlled slowdown as a result of the poor economy,'' Nisbet said. ''This made it almost what you would call a panic slowdown.''

U.S. airlines already have warned they will be laying off at least 46,000 people -- a number that could grow to 100,000.

United, one of the nation's largest carriers, is expected to announce thousands of layoffs as soon as this week. United had been on pace to lose about $1 billion this year due to the economic downturn and steep labor costs; analysts now say it could lose that much in the second half of the year alone.

Many carriers, including American, Continental, Delta, Northwest and United, have also scaled back their schedules by about 20 percent.

Foreign airlines likewise are suffering, with Virgin Atlantic, Dutch carrier KLM, Air France and Germany's Lufthansa among those saying they are scaling back routes, freezing hiring or cutting jobs, and rethinking whether they can buy new aircraft.

Related industries also feel the pinch. Sabre Holdings Corp., the nation's largest hotel and airline reservation system, on Wednesday reduced earnings expectations, becoming the latest travel business to say it expects losses.

Airlines are pinning their hopes on a federal aid package and have asked for $17.5 billion in help.

The House floated a $15 billion relief plan last Friday that could include $2.5 billion in immediate grants and $12.5 billion in loans and credits.

Boeing Commercial President and Chief Executive Alan Mulally said Boeing would not be seeking federal aid but would lobby for federal aid to the airlines.

''The most important thing for us is for the airlines to stay healthy,'' he told reporters Wednesday.

Trying desperately to convey some optimism, Mulally said Boeing would go forward with plans to build the new Sonic Cruiser, an airplane that could fly at nearly the speed of sound. Announcing education grants at a public school Wednesday morning, Mulally clutched a wooden model of the fast plane and sent it on a ''test flight'' through the audience.

He also said the company has no immediate plans to reduce capacity, such as by closing its suburban Renton plant where 737s and 757s are built and moving that work to the gigantic Everett factory north of Seattle.

For now, he said, airlines are delaying -- but not yet canceling -- plans to buy new airplanes.

Boeing's 2001 deliveries, which had been expected to be 538 commercial jets, could be as low as 500, Mulally said. For 2002, deliveries are estimated as low as 400, compared with the 510 to 520 previously forecast.

''I'm hopeful that this is a one, two-year thing,'' Mulally said, comparing it to the dip in airline travel after the Gulf War.

But Mulally admitted this is an unprecedented event, and it's hard to predict the fallout.

''Nobody ever anticipated this kind of a terrorist attack,'' he said. ''This is absolutely gut-wrenching.''


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