US Airways to Eliminate 11,000 Jobs;
Continental Will Default on Payments
A WALL STREET JOURNAL ONLINE News Roundup
US Airways Group plans to eliminate 11,000 jobs and Continental Airlines said it will default on $70 million in debt payments as the airline industry continues to reel from last week's terrorist attacks.
1U.S. Airline Industry Calls for Bailout as Top Carriers Cut Capacity 20% (Sept. 17)
US Air said it will also reduce its capacity 23%, following similar reductions announced by other major airlines over the weekend.
The announcements come as airlines are struggling to assess the financial impact of the attacks, which grounded flights and have led to a sharp drop off in new flight reservations.
Major airline stocks fell sharply to 12-month lows Monday as investors looked at the grim prospects for an already-weakened industry.
"We were already expecting industry losses of $2 billion this year," said Helen Becker, an analyst with Buckingham Research Group in New York. Airlines have been contending with lower revenue due to a cutback in business travel, and higher costs from labor and fuel. "Now, it could be as much as $7 billion" as airlines cope with lost business from last week when airlines were shut down, as well as much weaker traffic forecasts for the rest of 2001, she said.
Ms. Becker said that, given the shaky finances of some airlines, it wouldn't be surprising to see bankruptcy filings in the industry.
Over the weekend, Continental said it would furlough 12,000 of its 56,000 workers.
The company said Monday that in addition to defaulting on payments on its enhanced equipment trust certificates, it will cut about 20% of its capacity and eliminate 10 routes from its schedule.
Meanwhile, Delta Airlines, citing Continental's announcement, said Monday it has no intention of delaying payment on any of its financial obligations. Delta said it has no material financial obligations coming due prior to December.
Also Monday, Arizona Sen. John McCain pledged to do "everything in his power" to stabilize the financial condition of U.S. airlines.
"We don't need any further evidence to know that the airline industry is in dire trouble," said Mr. McCain, the ranking Republican on the Senate Committee on Commerce, Science and Transportation. "We must act immediately to support this crucial sector of our national transportation infrastructure which is so vital to our commerce and way of life."
House lawmakers are pushing a plan to immediately infuse airlines with $2.5 billion in federal grants and an additional $12.5 billion in federal loan guarantees. |
