"Airline execs pessimistic for future"

Wednesday, June 2, 2004

Airline execs pessimistic for future
By BRAD FOSS
The Associated Press


WASHINGTON -- The airline industry's poor financial health could get even
worse and, unless fuel prices fall or airfares rise, more furloughs and wage
concessions are likely, according to testimony airline executives plan to
present to Congress on Thursday.

Chief executives from six airlines will offer members of a House
transportation committee the latest snapshot of the industry's woes. They
are expected to reiterate concerns about the high costs of security, taxes
and war risk insurance, and emphasize the threat that rising fuel poses to
the industry's nascent recovery.

Gordon Bethune, the CEO of Continental Airlines and one of the executives
testifying on Thursday, will describe the industry's financial condition as
"perilous, and the skies are only getting darker," according to prepared
testimony obtained by The Associated Press. "All-time high oil prices and
the ever-increasing burden of government taxes and fees are killing the
industry."

"Unless fuel prices abate, or the revenue environment improves, we will have
to furlough employees and seek wage and benefit concessions," Bethune warns.
"We may also have to reduce our pension funding."

The run-up in oil prices has resulted in hundreds of millions of dollars of
additional jet fuel costs for several carriers in 2004.

In light of this fact, the industry has routinely criticized the Bush
adminination's policy of filling the nation's Strategic Petroleum Reserve of
oil at a time when each barrel costs nearly $40, saying that extra demand
has helped keep fuel prices high.
 
Executives speaking on Thursday are also expected to highlight the steps
their companies have taken - in United's case, through Chapter 11
proceedings - to operate more efficiently amid fierce competition for
budget-conscious fliers.

While operating expenses have been reduced dramatically, carriers have still
had difficulty raising ticket prices to profitable levels as low-fare
airlines such as Southwest Airlines and JetBlue Airways grow.

Even with billions of dollars in government assitance, the industry has lost
roughly $25 billion since the beginning of 2001 due to the country's
economic malaise and the sharp dropoff in travel that followed the Sept. 11
terrorist attacks. Most carriers are still losing money despite gradually
rising passenger traffic.


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