Attacks pushing airlines to brink

Associated Press

NEW YORK – Airlines are cutting back service dramatically to avoid bankruptcy after the terrorist attacks, with three major carriers reducing their schedules by 20 percent and one of them, Continental, laying off 12,000 employees.

American and Northwest did not specify how many jobs would be affected by their reductions in service.

The cutbacks at Continental, the nation’s fifth-largest airline, represent one-fifth of its workforce of 56,000.

“These actions are a direct result of the current and anticipated adverse effects on the demand for air travel caused by this week’s terrorist attacks on the United States and the operational and financial costs of dramatically increased security requirements,” the Houston-based carrier said in a statement Saturday.

Continental’s chairman and chief executive, Gordon Bethune, would not speculate when, or if, the employees might be called back to work.

Bethune said the airline has been losing $30 million a day since the attacks and that only 55 percent of its planes are back in the air, most of them flying half-empty.

“We’re taking immediate steps to preserve all the cash we had going into this debacle,” he said. “We are doing this in survival mode.”

Even before the World Trade Center and the Pentagon were hit by hijacked airliners, analysts predicted the industry would see huge losses because of the downturn in the economy.

But the figure has now ballooned to between $4 billion and $7 billion because of a drop in bookings caused by a fear of flying; the shutdown in air travel over the past few days; and the fewer flights and higher costs associated with the tight new airport security measures.

Without a huge bailout from the government, analysts say bankruptcy is imminent for even the largest airlines.

“The airlines simply won’t be able to do what they’re being asked to do without financial support,” said Helane Becker, an analyst at Buckingham Research in New York.

The nation’s nine largest airlines have been losing between $100 million and $250 million daily since the nation’s airspace was shut down and then gradually reopened following Tuesday’s disaster.

American, the nation’s largest airline, was the first to announce scaled-back service, on Friday. United and Delta, respectively the second- and third-largest airlines, have not said whether they, too, will cut back. Northwest, the No. 4 airline, said it will complete a review by next week.

Midway Airlines closed down Wednesday while in the midst of reorganizing its financially-troubled business, saying recent events dashed any hope for recovery. The North Carolina-based company laid off 1,700 employees.