Airlines Face 'Record Losses' After Attacks
By Ben Hirschler (Reuters )
LONDON (Sept. 13) - The world's airline industry warned on Thursday it
faced "record losses" in 2001 following this week's devastating terror
attacks in the United States, as airline shares fell again in Europe and
Asia.
Global international airlines body IATA estimated immediate revenue losses
and extra costs for its industry at $10 billion, underscoring an
increasingly gloomy assessment when airlines had already been struggling
with a downturn in business travel due to the economic slowdown.
Meanwhile investment analysts at Schroders Salomon Smith Barney downgraded
shares across the entire European aviation industry and said the attacks
were "likely to have a catastrophic effect on European airline
profitability."
William Gaillard, spokesman for the International Air Transport Association
(IATA) which has 266 member carriers, said the final cost could be well
above $10 billion.
"This is a ballpark figure, but we could be talking about immediate losses
of $10 billion this week alone. There could be a ripple effect, too,"
Gaillard told Reuters in Geneva.
"A week ago we were talking about losses of about $2.8 billion on
international scheduled traffic this year. There is no doubt it is going to
be more."
About 4,000 of the world's 12,000 commercial airlines have been grounded
since four jets were hijacked in the attacks. The U.S. market is worth
about $1 billion per day, according to IATA.
The Transportation Department on Thursday ordered U.S. national airspace
reopened to commercial and private aviation from 1100 EDT -- but flights
will only resume on a case-by-case basis when airports implement new
security measures.
And Dutch international carrier KLM warned passengers to expect continued
disruption. "There are clear indications that...airports will be
temporarily swamped by the vast stream of incoming flights, resulting in
lengthy delays," it said.
Many in the industry are braced for a rerun of market conditions seen after
the 1991 Gulf War when many people shunned air travel, and tough security
is expected to worsen congestion in terminals, probably forcing the most
over-stretched airports to cut peak-hour flights.
SOME AIRLINES TO FAIL
U.S. airlines were racing to minimise the financial damage by getting up
and running again as fast as possible. But analysts said several may go
under due to loss of business.
"Not all airlines will make it outside of bankruptcy protection," said
Samuel Buttrick, U.S. airlines analyst with UBS Warburg.
One small, already unprofitable U.S. carrier, Midway Airlines, gave up the
struggle on Wednesday, saying it was going out of business.
And ratings agency Standard & Poor's put its long-term corporate credit
ratings on all U.S. airlines on negative CreditWatch on Thursday, along
with British Airways Plc and Air Canada, both of which rely heavily on
traffic to the U.S.
Even when the industry returns to normal, tourist demand is expected to be
weak.
"So many people have canceled their holidays," said agent Louise Lee in
Hong Kong. "They are so scared...Except for business people, nobody wants
to go."
Investment bank Schroders Salomon Smith Barney said the industry faced
serious threats on three fronts -- reduced demand for air travel, perhaps
by as much as 20 percent initially; costlier fuel; and a greater risk of
global recession.
Even in good times airlines are extremely vulnerable to higher costs,
because they typically retain only about three percent of their revenue as
profit.
While U.S. share trading remains suspended, airline shares generally
slumped elsewhere, continuing a rout that started immediately after the
deadly attacks in New York and Washington on Tuesday. Massive falls in U.S.
airline stocks are expected when trading resumes there.
Shares in British Airways, which has great exposure to transatlantic
services, slid 5.2 percent on Thursday to 197-1/2 pence, compounding losses
on Tuesday and Wednesday, and reaching 10-year lows. The stock was also
downgraded by J.P. Morgan.
Lufthansa was down, too, shedding one percent to 12.47 euros, while
Scandinavian carrier SAS fell 1.69 percent to 58 Swedish crowns following a
downgrade by WestLB Panmure.
In Asia, Singapore Airlines lost 3.5 percent to S$9.65 and Japan Airlines
two percent to 304 yen.
But Air France managed to buck the trend, rising 4.58 percent to 12.55
euros as the firm said two flights to New York and one to Washington would
depart on schedule on Thursday afternoon.
09:42 09-13-01 |
