"U.S. Government Tells Airlines: Heal Thyself"

Thursday, April 3, 2003

Government Tells Airlines: Heal Thyself
By Kathy Fieweger


CHICAGO (Reuters) - As airlines strain to cope with a barrage of negative
factors, the latest a deadly virus that can spread aboard jets, the U.S.
government on Thursday told U.S. carriers to dig themselves out of the
financial morass.

U.S. Treasury Secretary John Snow said the troubled U.S. airline industry
needed to look in the mirror, cut its costs and not rely on government aid.

"The administration has made clear ... don't depend on us to solve these
problems," Snow said after a luncheon address to the Orlando, Florida,
Chamber of Commerce.

Orlando is a major U.S. and global tourist destination, home of Disney World
and other theme parks. Tourism and airline revenue particularly in the
United States and has slumped since the Sept. 11 attacks left many people
afraid to fly.

Total global airline losses since then are around $30 billion and growing.
Losses for the U.S. sector in 2003 are expected to total at least another
$11 billion.

A weak U.S. economy and corporate profits, the U.S.-led invasion of Iraq and
now, for some of the world's carriers, Severe Acute Respiratory Syndrome, is
fueling the worst aviation crisis in U.S. history.

SARS has now killed 80 people worldwide, although none yet in the United
States. The disease has infected more than 2,200 in parts of Asia, Europe
and North America.

The Pacific Rim, once one of the few regions to have held up relatively
well, is seeing bookings falling off a cliff.

A Hong Kong travel agents' association said tourist group bookings to the
city fell 90 percent since Wednesday, when the World Health Organization
warned travelers against visiting the territory and southern China because
of the virus.

Among airlines handing out masks to nervous passengers and crew are United
Airlines, Singapore Airlines, Cathay Pacific Airways and Thai Airways.

APRIL ANGST

Southwest Airlines Inc., the only top U.S. carrier to make money every
quarter since the Sept. 11 attacks, on Thursday outlined just how bad the
climate continues to be.

Southwest said March traffic was hurt in part by the war and that April
results were impossible to predict.

"Prior to the war, bookings for April travel were good," said Chief
Executive James Parker. "Since the war began, booking trends have been
inconsistent."

Shares of Dallas-based Southwest, a pioneer in low-fare, low-cost airline
travel, fell 2.3 percent to $14.68 on the New York Stock Exchange on
Thursday. Though its stock has fared better than that of its biggest rivals,
it remains well below its level before Sept. 11, 2001.

Flying only domestically within the United States, Southwest so far is
immune to troubles linked to the SARS virus, which is hurting international
bookings at bigger United Airlines and No. 4 Northwest Airlines Corp.

United, the No. 2 U.S. carrier, is already operating in bankruptcy
protection and can ill-afford yet another crisis as it reorganizes its debt
through the courts. Northwest's chairman on Wednesday said all U.S. carriers
were in trouble.

"We are all drowning," said Gary Wilson. "Northwest is just a little closer
to the surface than the rest."

Northwest, based in Minnesota, gets 25 percent of its revenue from
transpacific operations and will be very hard hit by any further drops in
traffic to the region, analysts said.

FLIGHT ATTENDANTS WORRIED

In Washington, the union for thousands of U.S. airline flight attendants on
Thursday demanded immediate precautions to protect flight attendants from
the deadly SARS virus, including distribution of masks and latex gloves.

The Association of Flight Attendants sent a letter asking the Federal
Aviation Administration to issue an emergency order requiring airlines to
provide the gloves and masks to the flight attendants, or at least allow
them to wear their own.

The union also wants airlines to develop passenger-screening methods and
provide guidance to flight attendants when a passenger exhibits symptoms
during a flight.

A flight attendant on a Singapore Airlines flight between New York and
Frankfurt on March 14 was infected with SARS, the union said in its letter
to Dr. Jon Jordan, Federal Air Surgeon at the FAA.

The Centers for Disease Control does not recommend surgical masks or other
protective equipment for air crews, but they can provide masks to any
passenger exhibiting symptoms, if they are available. The CDC urges air
crews to wash their hands after coming in contact with an ill passenger, and
issued guidelines for notifying authorities.

The FAA said it would work with airlines.

"The FAA shares the AFA's concern about the health and welfare of both crew
members and the traveling public," the agency said in a statement, adding
that it will collaborate with the industry "regarding the rapidly changing
SARS situation."

EUROPE MARCH TRAFFIC OFF

Two of Europe's largest airlines reported drops in March traffic on
Thursday, hurt by the war in Iraq and competition from low-fare rivals.

Europe's largest carrier, British Airways, said March passenger traffic fell
11.4 percent from a year earlier and premium ticket sales fell by almost a
quarter.

It warned that revenue might fall this year and war in Iraq and the SARS
virus had clouded the outlook for April.

KLM Royal Dutch Airlines reported a 3 percent fall in March passenger
traffic, less severe than many had feared, although analysts were cautious
about its outlook.

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