We’re entering some serious turbulence, airline watchers, and the captain has turned the seatbelt sign back on.
United Airlines is recalling pilots and flight attendants – and readying plans to lay off up to 6,000 workers. Yet even as they return to work, union flight attendants announced they had no confidence in the airline’s executives and planned to seek their replacement.
American Trans Air is flying close to bankruptcy, its stock has fallen to $2 a share and Nasdaq is threatening to remove it from its main stock exchange unless things turn around in the next two months.
Pilots at US Airways spent the Labor Day weekend mulling a contract that would cut their wages 35 percent, while also slashing pension benefits. The union’s governing council rejected the plan on Tuesday.
Continental Airlines said last week that it won’t make a pension fund contribution this year, and added that it plans to let go 425 people – 1 percent of its work force.
And Delta Air Lines is on the verge of bankruptcy, and contract talks with the pilots union have stalled. Delta wants $1 billion in concessions from the pilots, who so far are willing only to give up $705 million.
All in all, it’s a perilous time for U.S. legacy airlines – and that’s unsettling for Snohomish County’s aerospace industry, which seems to have finally turned a corner this summer, only to find the road ahead blocked by landslides.
U.S. Air may be in the most dire position. Some analysts say it’s only weeks away from slipping back into bankruptcy for the second time since the 2001 terror attacks. If that happens, there’s an extremely strong chance it will be liquidated.
“It’s basically a 50-50 chance at this point whether we’ll go back in bankruptcy,” Airline chairman David Bronner told Newhouse News Service in a recent interview. “If it goes into bankruptcy, my guess is it never comes out.”
U.S. Air is not a big Boeing customer. In fact, it’s phasing out the older Boeing jets in its fleet and replacing them with new Airbus jets, mostly A319s, A320s and A330s. It had also placed big orders with Embraer and Bombardier for regional jets, and it had planned to use all these smaller single-aisle planes in an effort to restructure from its old hub-and-spoke system into a regional low-cost carrier
The problem with that, according to Newhouse, is that U.S. Air has the highest operating costs of any U.S. airline – $11.18 per seat mile. (That’s an industry standard that measures the cost of flying one passenger one mile.)
ATA Airlines last month said it had only enough cash to get it through until early 2005.
Since then, it reached a cost-cutting contract with the International Association of Machinists, but it’s still trying to renegotiate leases on some of its airplanes, and – according to some news reports – it’s looking to sell its landing rights and operation at its hub airport at Chicago Midway.
If ATA can’t raise the price of its stock shares by Thanksgiving, however, Nasdaq will drop it off its main board and list it among its “small cap” stocks – those that trade between $1 and $3 a share, the Indianapolis Star reported last week.
ATA has been a good Boeing customer in the past. It flies a predominately Boeing fleet of 737s and 757s, and it has seven 737s on order.
But the airlines Boeing is watching the closest have to be Delta and Continental, which between the two of them have 116 planes on order – more than 10 percent of the company’s entire jet backlog.
Delta, which already has pushed back delivery dates on its 737s and 777s, could announce details today on a new strategic plan, which the Washington Post said could include wage cuts, a reduction in flights – and even a bankruptcy filing.
Rumor has it that Delta will walk away from its hubs in Dallas and Salt Lake City – where its name is on the city’s main sports arena, the Delta Center – The Salt Lake Tribune reported last week.
Other analysts downplay that, saying that Delta’s survival is based on flying in Western markets, the paper said.
All the uncertainty underscores what Pat Keaty, the director of human resources at Goodrich Corp.’s Everett jet maintenance base, said last month.
On the one hand, this is a good time for airlines and the aerospace industry, because passenger numbers are up, he said. But on the other hand, airline revenues are slim and they’re being hurt even more by rising fuel prices.
“It’s the most volatile environment I’ve seen in commercial aviation since 1987, when I started,” Keaty said. “It’s still very tenuous.”
Reporter Bryan Corliss: 425-339-3454 or corliss@heraldnet.com.
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