AIRLINES IN TROUBLE: Analysts see a tough market for carriers

["Charles Brown" <CharlesB@xxxxxxxxxxxxxxxxxxxxx>]

 AIRLINES IN TROUBLE: Analysts see a tough market for carriers

Layoffs, cutbacks loom as travelers hit the road
September 17, 2001

MARY SCHLANGENSTEIN
BLOOMBERG NEWS

Shares in U.S.-based airlines are expected to fall dramatically today, the first trading day since hijackings temporarily halted U.S. aviation and scared off travelers, prompting most carriers to slash schedules by 20 percent and to weigh layoffs.



"The airline stocks will be down anywhere from 25 percent to 60 percent from the start," said George Ireland, whose investment firm Ring Partners LLP takes long and short positions in the shares. European carriers declined 28 percent after the attacks last week, while Asian carriers fell 13 percent.



The U.S. carriers' shares may fall more than 50 percent when trading resumes according to Credit Suisse First Boston analyst James Higgins.



The American Stock Exchange Airline Index had already declined 31 percent this year as carriers contended with lower demand as companies sent employees on fewer trips or sought cheaper fares because of the slow U.S. economy.



How quickly shares recover primarily will depend on "steps taken to boost the economy overall, as well as any direct aid programs authorized by Congress," investor Ireland said.



Among airlines vulnerable to the slowdown are sixth-biggest carrier US Airways Group Inc., which failed in a bid to be acquired by UAL and already was forecast to have a loss of $6.96 a share this year, and National Airlines Inc., which sought Chapter 11 bankruptcy protection in December, analysts and consultants said. Midway Airlines Corp., which already was operating in Chapter 11, shut its doors a day after the attacks.



"Midway thought enough of this that they checked out," said Bob Mann of RW Mann & Co., an airline consulting firm.



Some airlines may be forced into Chapter 11 bankruptcy court protection without financial help, industry executives, analysts and consultants said. Continental said Saturday that it was laying off the 12,000 workers, cutting the schedule and pressing for government aid to avoid just such a scenario.



Continental and Southwest Airlines Co. were, at least until last week's events, the only two U.S. carriers forecast to make profits this year. Now Continental is losing $30 million a day.



Airlines that operate on the eastern U.S. coast are expected to be particularly hard-hit, as are carriers that specialize in shorter routes as passengers opt to drive instead of face higher security measures and long lines at airports. Ronald Reagan Washington National Airport remained closed today because of security concerns tied to its proximity to federal buildings.



Brad Bartholomew, a consultant and commercial pilot who tracks labor industries for his firm, the Newfoundland Group, said it's reasonable to expect that some travelers will avoid airlines for good.



"Nobody knows what demand will be in six days, six weeks or six months," Bartholomew said. Airlines "were teetering on a recession and now we may be teetering on an industry depression."