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Travel firms' hopes fading
©Associated Press NEW YORK -- The travel industry's grim outlook worsened Monday, and airline and hotel stocks gave back some of last week's heady gains, on fears that a war could be more drawn-out than investors originally anticipated. Delta Air Lines, the nation's third largest carrier, said it would shrink its network by about 12 percent, reducing service domestically and internationally as a result of fewer travelers since the war began in Iraq. The company's stock plunged 15 percent Monday. There is no word yet on what the Delta flights cuts will mean for Tampa International Airport, where it's the largest carrier. "Right now we don't have city-specific numbers," said Peggy Estes, a spokeswoman at Delta's Atlanta headquarters. "The cuts will be 12 percent across the board, domestic and international. Not all markets will see 12 percent. Some will be less and some will be more." "It looks like they're waiting to see how the war plays out," said Karen Miller, a spokeswoman for the Air Line Pilots Association in Atlanta. The cutbacks at Delta followed similar moves made last week by United Airlines, Continental Airlines and Northwest Airlines, which said it would lay off 4,900 employees and trim its flight schedule by 12 percent. With the industry's woes mounting, lobbying for federal aid has intensified in recent days but no deals have been struck. Transportation Secretary Norman Mineta, who advocates airline relief, met with Bush administration officials Monday. But no aid was proposed for the airlines in the $75-billion war-spending bill crafted at the White House on Monday, dashing the hopes of some industry officials. Most of the money in the Bush administration bill would go to the Department of Defense. Congress may support extending war-risk insurance, which protects airlines from liability claims for injuries resulting from war or terrorism, and reimbursing them for new security costs, such as bulletproof cockpit doors, said Gary Burns, spokesman for House aviation subcommittee chairman John Mica, R-Fla. Major airlines have asked for much more, though, including up to $9-billion in tax cuts. "Their proposal to receive a tax holiday has met with considerable skepticism on the Hill," Burns said. The hotel industry's troubles also were apparent Monday as Starwood Hotels & Resorts Worldwide Inc., owner of the Sheraton and Westin brands, withdrew its first quarter and full year earnings forecasts. The news sent its stock price tumbling. The White Plains, N.Y., company said it was surprised by the "significant deterioration in business" as a result of worsening geopolitical conditions. Starwood also said its bottom line has been squeezed by higher energy costs this winter. Merrill Lynch analyst David Anders said in a report released Monday that he expects Starwood to lose a penny a share in the first quarter, revising his previous estimate of a gain of 4 cents per share. Starwood's stock price fell $2.69, or 10 percent, to close Monday at $24.11 on the New York Stock Exchange. Wall Street's opinion of other hoteliers also soured. Shares of Hilton Hotel Corp. fell $1.27 to $11.64, while those of Marriott International declined $3.02 to $31.86. Last week, travel industry stocks rose sharply on hopes that the war in Iraq would end relatively quickly and that the drop in demand in anticipation of military conflict would soon be restored. That prognosis was called into question over the weekend, though, as it appeared U.S.-led forces would meet stiffer resistance in Iraq than investors had assumed. All major carriers came under pressure on Wall Street on Monday. American Airlines' stock dropped 30 cents, or 12.6 percent, to $2.08. The Fort Worth, Texas-based airline is considered likely to be the next major carrier to file for bankruptcy. Shares of United, the No. 2 carrier, slipped 2 cents to 83 cents. The airline is currently restructuring under Chapter 11 of federal bankruptcy law, but recently said it could be forced to liquidate. Meanwhile, federal pension regulators expect to decide this week whether to accept a deal struck between US Airways and its pilots on a new pension plan, the last major obstacle to the airline's emergence from bankruptcy. The airline and the pilots' union agreed over the weekend on a new, defined-contribution plan that will replace the old defined-benefits plan. US Airways filed for bankruptcy in August, after losing $2-billion in 2001. The airline has shed roughly a third of its pre-Sept. 11 workforce of 46,000, and employees have agreed to more than $1-billion a year in wage concessions to keep the airline afloat. Shares of Continental fell $1.17 to $5.65, and those of Northwest Airlines declined 94 cents to $7.36 on the Nasdaq Stock Market. Delta's stock fell $1.73 to $9.52.
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From the Times Business report
From the AP
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