War, lack of official aid could spell out disaster for U.S. airlines

U.S. air companies –downtrodden by the impact of terrorism and a swaying economy- forecast more layoffs and massive losses in case of a war against Iraq and unless the federal government hands out more bailout packages.

The worsening crisis in aviation could also make a similar dent in the leisure industry, according to a report released by the Air Transportation Association (ATA), an entity that clusters all major U.S. airlines.

Layoffs could range from 70,000 to 100,000 jobs, while losses caused by the war could peak $4 billion every quarter of the year, let alone the potential elimination of 3,800 daily flights.

To add fuel to this chaotic and flaming outlook, experts foresee a spike of plane ticket prices while the ATA has warned about the possibility of other air companies filing for Chapter 11 and small-time airlines taking down their shingles altogether.

The ATA document entitled “Airlines in Crisis: The Perfect Economic Storm,” also points out –without further details- the “real prospects that the ongoing economic hardships could force the nationalization of the sector.”

ATA president James May said commercial aviation needs larger bailout packages handed out by the federal government similar to those granted after the 9/11 terrorist attacks coupled with tax cuts.

“Without an action on the part of the government, the aviation industry could end up out in the cold,” Mr. May added.

The report also laid bare that during the 1991 Gulf War, U.S. airlines had sound finances and had amassed $3.9 billion worth of revenues between 1984 and 1989. However, it took them four years to snap back from those dire straits.

Megabuck air carriers in the United States are seeking more economic aid on the part of the federal government to cope with skyrocketing fuel prices and security measures being implemented both in airports and inside aircraft.

On the heels of the 9/11 attacks, the U.S. Congress passed a bailout package for $5 billion in cash money plus a $10 billion credit line. This time around, though, the administration is refusing to hand out more official aid.

As we speak, US Airways and United are trying to work their way out of bankruptcy, while American Airlines –the world’s biggest carrier- together with Delta and Continental- could find shelter in the Bankruptcy Act in order to reshuffle their finances, sources close to the industry said.