Continental Cuts Flights, Lays Off 12,000
By Kathy Fieweger
CHICAGO (Reuters) - Two major U.S. airlines, Continental and Northwest, said on Saturday they will cut their long-term flight schedules by about 20 percent, with Continental also laying off 12,000 workers as bookings plunge and security costs rise.
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Continental Chief Executive Gordon Bethune also said the Houston-based carrier could file for bankruptcy protection by late October if Congress does not provide immediate assistance to the airline industry. Continental is the fifth largest U.S. carrier.
Terror attacks in New York and Washington have caused an additional $1 billion in U.S. industry losses on top of substantial ones already booked for 2001, Bethune said, and forecasts are for a 50 percent drop in traffic.
``The U.S. airline industry is in an unprecedented financial crisis,'' he said, predicting 100,000 layoffs industry-wide.
Carriers around the globe are reeling from the effects, too, as they were prevented from flying to and from the world's largest commercial aviation market for nearly three days.
The Bush administration on Saturday said Transportation Secretary Norman Mineta would meet with airline executives as early as Monday to discuss options.
The news from Continental and No. 4 Northwest was the first solid confirmation that Americans have sharply curtailed plans to travel following Tuesday's hijackings.
The crash of four hijacked jetliners -- two each from AMR Corp.'s American Airlines and UAL Corp.'s United Airlines -- on Tuesday completely shut down the nation's aviation industry for two days.
MILLIONS OF DOLLARS LOST EACH DAY
Bethune said at a news conference that the U.S airline industry is losing about $300 million per day. Continental itself is losing $30 million per day.
Northwest refused to comment on potential layoffs and would only say it was reviewing the matter.
The airlines' news portends more cutbacks and layoffs by other U.S. carriers as they struggle to cope with new restrictions forced on the industry. Passengers are changing the way they look at air travel, Bethune said.
``Behavior is changing in front of our eyes,'' he said.
In the last four days, the airline said it has seen a ''drastic'' drop in bookings. Many corporations have instructed employees to avoid U.S. airlines, it said.
``Our industry needs immediate Congressional action if the nation's air transportation system is to survive,'' Bethune warned.
Continental was one of a few U.S. airlines to report a profit in the third quarter as a weak U.S. economy, slumping business travel and higher fuel prices battered the field.
Following the U.S. air space shutdown, carriers have been struggling to resume even partial schedules, only reaching about half of normal flight levels on Friday. Much higher costs to implement new security measures ordered by the Federal Aviation Administration and the falling travel demand have forced the schedule and workforce cuts.
WATERSHED EVENT
Wall Street and aviation analysts, only beginning to assess the enormous financial damage, have started to pinpoint this year's losses at around $4 billion to $5 billion for the U.S. industry alone.
Some experts are using phrases like ``watershed event'' and ''mind-boggling episode'' to describe the unfolding catastrophe for airlines both here and abroad.
Last week, the Geneva-based International Air Transport Association said the global industry could face $10 billion in immediate revenue losses. The U.S. market is worth about $1 billion per day, according to IATA. But the slowdown on Canadian and Mexican markets as well as in transpacific and transatlantic traffic must also be considered.
Hijackers commandeered aircraft and crashed them into New York's landmark World Trade Center twin towers, which collapsed. Another flight was rammed into the Pentagon and a fourth plane crashed in Pennsylvania. Hundreds were killed and thousands remain missing.
The U.S. Federal Aviation Administration grounded all commercial air traffic on Tuesday for the first time.
On Thursday, the U.S. Department of Transportation ordered the U.S. national airspace reopened to commercial aviation. But flights resumed slowly as airports and airlines implemented security measures.
Before the attacks, Continental and its subsidiaries flew more than 2,500 flights a day. The cutbacks represent 21 percent of the airline's payroll of more than 56,000 people.
CONGRESS ALREADY DEBATING
Continental said it expects to announce the details of its schedule reduction and furloughs within the week.
House Democratic leader Richard Gephardt said he expected there would be legislation to help U.S. airlines struggling with liquidity problems.
But that assistance may not be assured. In Washington, a bipartisan group of U.S. lawmakers on Saturday failed to push a plan to aid U.S. airlines through the House of Representatives despite warnings that the industry faced meltdown in the wake of terror attacks.
Supporters of the proposal, authorizing $2.5 billion in grants and $12.5 billion in loan guarantees, sought to get the measure approved on a fast-track to send a signal to financial markets reopening next week that Congress would try to cushion the economic effects of the devastating assaults.
Rep. Lloyd Doggett, Democrat of Texas, said it was wrong to authorize subsidies to an industry so soon after the devastating attacks. |
