US Airways to cut flight schedule, 11,000 jobs

By BILL ADAIR

© St. Petersburg Times,
published September 18, 2001

WASHINGTON -- The grim news for the airline industry got worse Monday, prompting congressional leaders to step up efforts for a federal bailout that would include loan guarantees, tax breaks and billions of dollars in cash.

Stocks in the eight largest airlines plummeted by an average of 44 percent when trading resumed for the first time since last Tuesday's terrorist attack. US Airways, the largest carrier at Tampa International Airport, announced 11,000 layoffs and said its flight schedule would be cut by 23 percent.

Most other major carriers have reduced flights by about the same amount.

"The entire U.S. aviation system is in jeopardy," warned US Airways president Rakesh Gangwal. He called on the government to take decisive action to prevent the industry from collapsing.

Supporters in Congress agree there is an urgent need for a federal bailout. For weeks, the economic downturn has slowed airline bookings. Now, because of the attack, the air carriers are facing expensive new security requirements at a time when many people are afraid to fly.

"The airlines are a national economic asset," said Rep. Tom DeLay, R-Texas. "If they spiral into bankruptcy, our broader economy will suffer unacceptable damage."

Rep. John Mica, the Winter Park Republican who is chairman of the House Aviation Subcommittee, said a bailout is important to Florida. "So much of the economy is geared to aviation that the impact could be devastating if we don't act," he said.

This morning, airline chief executives will meet with Transportation Secretary Norman Mineta to discuss new security requirements and the need for federal money. The airlines are proposing a $24-billion plan that would include $11.2-billion in loan guarantees and grants, $7.8-billion in tax breaks and $5-billion in emergency cash.

"It's a matter of survival," said Michael Wascom, a spokesman for the Air Transport Association, the airline trade group. "This is not a bailout. This is designed to get us from the events of Sept. 11 forward."

The chief executives will tell Mineta that industry projections show that passenger demand will decline 25 to 60 percent because of the attacks. More than 100,000 airline employees could be laid off.

Rep. James Oberstar, D-Minn., said the airlines "could be in complete financial liquidation within a week or two." He said that the cost of the airlines' liability insurance has doubled in the past week and that, collectively, the airlines are losing as much as $400-million every day.

A collapse of the industry would have a ripple effect for thousands of workers in related businesses, Oberstar said.

Last Friday, Oberstar and Republican leaders proposed a plan that contained $12.5-billion in loan guarantees. The guarantees are important for the airlines because creditors are reluctant to loan money to the troubled industry.

The plan also would have provided an immediate infusion of $2.5-billion in cash and would allow President Bush to delay collecting taxes from the airlines.

Supporters tried to push the bailout plan through the House on Friday night, but the effort was blocked by Rep. Lloyd Doggett, D-Texas, who said the government should not hurry into a costly plan.

"Perhaps that subsidy is well-justified," Doggett said. "I may vote for it myself because it is so compelling. But if it is so compelling, it will be as compelling in the bright light of day as it is with insults and threats at midnight."

Rep. C.W. Bill Young, R-Largo, said Monday that he opposed the bailouts for Chrysler and the city of New York because they were an unwarranted intrusion on the free market. But he thinks the airline plan is justified.

"The United States must continue to have an airline industry," said Young. "We can't lose our opportunity to transfer goods by air."

In addition to the financial package, the airlines are seeking a limit on liability from last Tuesday's attacks. They want Congress to pass a law that would hold them liable for the deaths of passengers and crew, but protect them from lawsuits for victims and businesses on the ground.

On Monday, shares of AMR Corp., the parent of American, plummeted 39 percent to $18 a share on the New York Stock Exchange. Shares of UAL Corp., which owns United, plunged 43 percent to $17.50 and Delta, 44 percent to $20.64.

US Airways Group fell 52 percent to $5.57, also on the NYSE. It announced the layoffs after the close of trading.

An exception to the airlines' gloom and doom was Dallas-based Southwest Airlines, the No. 3 carrier at Tampa International.

Southwest was on schedule to fly 2,772 departures Monday, just six short of the number it flew the day before the terrorist attacks Tuesday, spokesman Ed Stewart said. The airline intends to maintain the schedule for the foreseeable future, he said.

Southwest hasn't laid off an employee since it began flying in 1971 and pledged in a recorded message to nearly 31,000 workers Saturday that executives expect to keep that record unblemished.

"Can we guarantee you will have jobs forever if no airplanes fly? Of course not. Can we guarantee you have no immediate concerns about job security? We can and we do. . . . Hang in there. This, too, will pass. We love you."

- Times staff writer Steve Huettel contributed to this report, which used information from the Associated Press.

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