Airline Stocks Sell Off Sharply in Wake of Terrorist Attacks
By THE ASSOCIATED PRESS
Filed at 6:33 p.m. ET
NEW YORK (AP) -- With bankruptcies looming after last week's terrorists attacks, airlines and travel-related companies were punished Monday on Wall Street and three U.S. carriers responded by laying off a total of 14,500 employees.
After markets closed, US Airways Group Inc. (news/quote) said it would lay off 11,000 employees, America West Holdings Corp. (news/quote) said it will eliminate 2,000 jobs and American Trans Air said it will let go of 1,500 employees.
The industry is lobbying for a $20 billion federal bailout, having lost $1 billion already because of weak demand from nervous travelers, a costly two-day shutdown of the nation's air system and higher security-related expenses.
``The entire U.S. aviation system is in jeopardy,'' Stephen Wolf, US Airways chairman said in a statement.
An industry group said Monday as many as 100,000 layoffs are likely in coming weeks. Major carriers have already trimmed schedules by at least 20 percent and laid off more than 26,000 workers, including Monday's cuts.
The airlines' woes reverberated throughout the travel industry as shares of hotel, rental car and electronic ticketing companies became mired in the selloff.
Analysts say airlines are the most vulnerable over the long-term.
``We do not believe every airline's survival is guaranteed under any circumstances,'' said Jim Higgins, analyst at Credit Suisse First Boston (news/quote) in New York. Higgins said the industry will lose at least $5 billion this year.
Continental laid off 12,000 employees, more than one-fifth of its work force, over the weekend.
American Airlines, the nation's largest airline, will announce layoffs later this week, a company official said on condition of anonymity. The exact number of layoffs will partly depend on the size of the federal bailout, the official said.
Shares of AMR Corp. (news/quote), the parent of American, plummeted $11.62, or 39 percent, to $18.08 on the New York Stock Exchange. Shares of UAL Corp. (news/quote), which owns United, dropped $12.90, or 42 percent, to $17.92 on the NYSE, where Delta plunged $16.74, or 44 percent, to $20.51 a share.
US Airways Group Inc. fell $5.57, or 52 percent, to $6.05, also on the NYSE. It announced the layoffs after the close of trading.
Electronic reservation firm Sabre Inc.'s stock fell $15.54, or 39 percent, to $23.89 on the NYSE and rival Galileo International Inc. (news/quote)'s stock tumbled $8.57, or 30 percent, to $20.03.
Online travel agencies trading on the Nasdaq Stock Market also were affected. Travelocity.com Inc. (news/quote) shares dropped $9.52, or 43 percent, to $12.50 a share and Expedia Inc. (news/quote) shares fell $11.50, or 31 percent, to $24.75.
Cendant Corp. (news/quote), owner of Days Inn and Avis, also got hurt in NYSE trading, with shares falling $3.31, or 19 percent, to $14.45. Shares of Marriott International Inc. (news/quote) dropped $8.43, or 21 percent, to $33.42 on the NYSE.
Forrester Research (news/quote) analyst Henry Harteveldt said online travel companies have noticed a falloff in business since hijacked planes were used last Tuesday in terrorist attacks on the World Trade Center and Pentagon.
Harteveldt is optimistic about online travel, though, saying airlines and hotels will rely on the Internet, a lower-cost distribution channel, as they try to lure back customers with cut-rate fares. Internet travel agents might also begin selling train and bus tickets as Americans shun long-distance air travel, he said.
As the industry seeks to bolster confidence in the safety of air travel, airline officials have emphasized to Bush administration officials that aviation security and national security are linked and that the government should assume some responsibility, said John Heimlich, director of economic research for the Air Transport Association.
Executives also pressed for a bailout worth $20 billion that includes direct aid, low-interest loans, tax relief and a takeover of insurance liability from claims related to the terrorist acts, Heimlich said.
The industry was struggling long before the attacks under a large debt burden and rising costs of labor and fuel, as revenues from business fliers dropped alongside the nation's economic performance.
Mark Zandi, chief economist at Economy.com, said the government has an obligation to help the air transportation industry, estimating that the movement of people and cargo contributed roughly $104 billion, or 1.1 percent, to the nation's economic output in 2000.
``The industry plays an outsized role in the day-to-day performance of the economy,'' Zandi said.
In an effort to remain solvent in the meantime, American, Continental, Delta, Northwest and United scaled-back their schedules by 20 percent.
National Airlines of Las Vegas cut back its operations by 20 percent Sunday and laid off 300 workers, leaving it with 1,000 employees. Midway Airlines (news/quote) of North Carolina closed down last week while in the midst of reorganizing its financially troubled business, laying off 1,700 employees.
London-based Virgin Atlantic Airways said Monday it would cut about 1,200 jobs and reduce schedules by 20 percent.
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AP Business Writer David Koenig contributed to this report
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