"Airlines Expect to Lose $8 Billion"

Thursday, September 26, 2002

Airlines Expect to Lose $8 Billion
By BRAD FOSS
The Associated Press

   
NEW YORK -- The Air Transport Association, a trade group, is predicting
that the airline industry could easily lose $8 billion by the end of the
year, exceeding the record-breaking losses of 2001.

David Swierenga, the trade group's chief economist, said Thursday that
major carriers are on course to lose $1.5 billion to $2 billion in the
third quarter and $2.5 billion to $3.5 billion in the fourth quarter,
reflecting a seasonal decline in the last three months of the year.

Airlines lost $3.8 billion in the first half of the year and revenue
remains down about 15 percent on average, Swierenga said.

In 2001, airlines had a combined net loss of $7.7 billion, although that
included the effect of $5 billion in cash paid out by the federal
government as part of a bailout approved by Congress after the terrorist
attacks.

Passenger traffic remains extremely weak, with 10 percent fewer people
boarding planes in August compared with a year ago, when the demand for
travel had already been sharply crimped because of the economic
downturn.

Another serious problem for the industry is the increased
bargain-hunting by business travelers, who traditionally have paid more
than leisure travelers. By hunting for fares on the Internet and
purchasing in advance, business travelers have seen huge savings.

The economy remains fragile and talk of war with Iraq has caused jet
fuel prices to rise and investors to worry about a dropoff in
international travel.

Executives are worried that a war in Iraq could cause more financial
damage and force the weakest carriers into bankruptcy.

The chief executives of American, Delta and Northwest lobbied Congress
on Tuesday, seeking government assistance for terrorism insurance and
the extension of a $10 billion loan guarantee program in the event of a
war, among other requests.

US Airways is currently restructuring under Chapter 11 and United
Airlines is considered by many to be the next likely candidate.

Shares of the nation's largest carriers, which are trading at 52-week
lows, moved sharply higher on Thursday after United Airlines' unions
offered to slash labor costs by $5 billion to help stave off bankruptcy.

On the New York Stock Exchange, United climbed 73 cents to close at
$2.94, American rose 66 cents to $4.86 and Delta surged 95 cents to
$11.50.


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