Airlines first to feel global turbulence

Air New Zealand is in trouble, but as WARREN GAMBLE reports, it is joining the majority of the world's airlines.

Who would be in the airline business now? It is a question being asked not just in the boardrooms of Air New Zealand and Ansett Australia, but around the world in the wake of the terrorist attacks in the United States.

Australian-based aviation analyst Ian Thomas answers with another question: "Who would have been in it before? It's one of those unusual industries that is affected by every part of the economy and it's also the first one to be affected, so there is no way of preparing for it."

Before the hijacked airliners slammed into the World Trade Center's twin towers, carriers the world over were feeling the impact of a slowing global economy.

In April, the second-largest United States carrier, United Airlines, recorded a $US305 million ($751 million) first-quarter loss, blaming a drop in business travel in a softer US economy.

The airline said labour and fuel costs had also risen dramatically, and projected a full-year loss. It was not alone.

The September 11 disaster has accelerated that decline into freefall. Each day major airlines announce flight reductions, staff cuts and spiralling losses estimated at $US3billion for the US alone.

This week, the world's biggest carrier, American Airlines, said it would cut flights by 20 per cent. The group, which includes a commuter operation, has announced 20,000 layoffs, the same number as its nearest rival, United. Other big US players, Continental and Delta, say they will shed 12,000 and 13,000 staff respectively.

In total, 100,000 airline job cuts have been announced in the United States since the attacks, and some carriers have warned they are close to filing for bankruptcy protection.

In a bid to stem the haemorrhaging, President George W. Bush on Thursday issued a plea to his countrymen to "Get on the airlines! Get about the business of America".

He backed up his call with plans to boost airport and airliner security, including a call for National Guard troops to be posted at every commercial airport. A fund is also being set up to finance stronger cockpit doors.

That comes on top of the US Government's $US15 billion aviation aid package approved a week ago. It will pay $US5 billion in direct compensation to carriers for losses after the September 11 national airport closure and provide $US10 billion in federal loan guarantees.

It will also provide war-risk insurance, averting a possible shutdown of the global industry after private insurers said they intended to cancel war cover.

European governments are set to follow suit as the crisis bites deep for already struggling carriers.

British Airways has announced 5200 job losses this week, on top of the 1800 largely voluntary cuts made before the attacks. It is also grounding 10 long-haul aircraft and cutting capacity by 9 per cent after profit fell by an an estimated $140 million in the past fortnight.

Italy's flagship Alitalia is cutting 2700 flight crew and ground staff jobs, and grounding 13 jets, in response to what it calls "by far the worst crisis commercial airlines have faced since the end of the Second World War".

Irish carrier Aer Lingus is trimming its schedule by a quarter and getting rid of 600 temporary jobs; Belgium's already unprofitable Sabena says it will not last beyond the end of the year unless it can restructure; and analysts say the survival of the weakened Swissair Group is now in the hands of creditor banks.

Elsewhere, Air Canada has announced another 5000 job losses on top of 4000 scheduled before the attacks, and is cutting its services by 20 per cent. And Brazilian carrier Varig is eliminating 1700 jobs and grounding 20 per cent of its planes.

The International Air Transport Association predicts passenger traffic worldwide could be down 16 per cent for the second half of the year.

Ian Thomas, a senior consultant with the Centre for Asia-Pacific Aviation in Sydney, said the economic slowdown meant the impact of the terrorist attacks was felt almost immediately. Competition in the US market was fierce and even the smallest ripple was felt, let alone the shockwaves from New York.

US consumers reacted instantly to the terrorist attacks by crossing air travel off. The threat of further attacks and a wider war following the US response would keep many on the ground, along with their airlines.

Thomas says Air New Zealand was particularly exposed, not just because of its Ansett problems, but because of its dependence on the US as a market and as a feeder for its European flights. Big-ticket items such as fuel and leasing costs were also paid in US dollars.

Thomas says optimists in the industry project a one- to three-year recovery period for major airlines; realists are looking at three to five years.

Full coverage: Terror in America

Pictures: Day 1 | Day 2 | Brooklyn Bridge live webcam

Video

The fatal flights

Emergency telephone numbers:

United Airlines: 0168 1800 932 8555

American Airlines: 0168 1800 245 0999

NZ Ministry of Foreign Affairs and Trade: 0800 872 111

US Embassy in Wellington (recorded info): 04 472 2068