Softie, careful with those airline stocks:
Boeing CEO sees major airline bankruptcies - CNBC
10/5/01 8:22 PM ET
SEATTLE, Oct 5 (Reuters) - Boeing Co. (BA.N) Chairman Phil
Condit said on Friday he sees major airline bankruptcies ahead as
the industry copes with a crisis that could be ten times worse
than the slowdown during the 1990-1991 Gulf War.
In an interview with CNBC television, Condit defended
Boeing's decision to let go up to 30,000 workers from its
world-leading commercial jet unit and insisted the nation's
airways have never been safer, despite the Sept. 11 U.S. hijack
attacks.
Already Midway Airlines (MDWYQ.PK) has gone bankrupt,
followed by Swissair (SWSZn.VX) , Belgium's Sabena [SAB.UL] and
charter airline City Bird (CBIR.ED). Experts see more failures
ahead, despite a $15 billion U.S. government bailout package for
domestic carriers.
"I think we can see bankruptcies in the U.S. airlines in the
next 30 or 60 days," Condit said. "I've seen different reports
and different analyses. I looked at one yesterday, an academic
analysis, that said certainly half, maybe more than half."
Air travel has plunged following the hijackings, in which
four Boeing-built jets were crashed, leaving nearly 6,000 people
missing or dead, New York's World Trade Center in ruins and a
huge hole in the side of the Pentagon near Washington, D.C.
Ticket purchases also slumped when U.S.-led forces attacked
Iraqi occupiers in Kuwait in 1991, but this slowdown will be much
worse, Condit said.
"At the peak, the Gulf War produced a decline of 2 percent
in traffic," Condit said. "Best guess today is that this will be
five to 10 times worse than what we saw in the Gulf War."
EARNINGS WILL SUFFER
The downturn has slashed demand for jets built by Boeing and
rival Airbus SAS [ARBU.UL], and Condit said this slump would be
the worst or second-worst in the history of air travel, forcing
layoffs at Boeing's Seattle-based jet unit.
"The trade here is do you put 20 or 30 thousand people out of
a job or you wait longer and put 80,000 people out of a job,"
Condit said.
Chicago-based Boeing has already cut its forecasts for jet
deliveries to 500 in 2001 from a previous estimate of 538; to 400
in 2002 from 510 to 520; and to an undetermined number below 400
in 2003.
Asked if analyst projections for a 2003 total below 300 were
possible, Condit replied: "It's possible, yes."
Condit acknowledged that Boeing's earnings would suffer as a
result of the cuts, but said the company had not yet determined
the extent of the damage.
"There clearly is going to be some (damage). We are going to
pick up some on the military and defense side and we are going
through those numbers right now," Condit said.
Boeing also builds fighter jets, transport planes, missiles
and munitions in its military unit and provides military
maintenance services, as well as satellite manufacturing and
rocket launches.
Tighter airport security in the wake of the hijackings has
greatly improved air travel safety, though the flying public has
yet to be convinced, Condit said.
"I don't think there has ever been a safer time to fly than
right now," Condit said. " We have very much attuned to what the
issues are, but that feeling of safety has to come back." |
