PAUL LEWIS / WASHINGTON DC & REBECCA RAYKO / MIAMI
Despite promises of financial aid, the carriers are taking frantic action to cut costs
The US Government's recently announced $15 billion aid package for the US air transport industry has failed to stem the loss of jobs, which has now ballooned to over 100,000 lay-offs in the wake of the Delta Air Lines decision to shed 15% of its workforce, and a series of cutbacks by smaller regional operators. The cash injection, however, is expected to stave off any immediate bankruptcies and buy carriers time for traffic to recover.
Delta, it is estimated, will receive over $750 million in cash compensation from the government, but none the less announced plans to cut 13,000 jobs by the end of the year five days after Congress approved the airline aid bill. Even with the financial relief provided by the US Government, revenues would decline dramatically through next year, predicts Delta chief executive Leo Mullin.
The cash assistance portion of the financial aid package will merely provide short-term relief, as it was calculated to apply only from 11 September through to the end of the year, Mullin says: "Demand - and hence revenue - is depressed and operating costs are getting higher. As a result, Delta is experiencing negative cash flow." Delta is also reducing capacity by 15% from 1 November, citing load factors of approximately 30%.
The carrier says it has lost $1billion since the terrorist attacks and expects passenger demand to remain depressed for at least a year.
Other measures being taken by the country's third-largest carrier include grounding up to 60 aircraft at any given time, suspending 50% of Delta Express capacity to Florida as the result of a slump in leisure travel, and replacing some mainline services to Pennsylvania and Reno with Delta Connection regional services. Flights from New York to Tokyo, Tel Aviv, Munich, Dublin, Shannon, Cairo, Dubai, Zurich and Brussels will be suspended until March 2002, and flights to Stockholm are suspended indefinitely.
American Airlines will get one of the biggest government handout, based on its available seat miles and those of recently acquired TWA, but despite this and furloughing 20,000 employees, its future remains in doubt. "Simply put, the aid package and the substantial job reductions are not going to save the company. Our passengers have not come back yet-even with government aid, the survival of our company and the whole industry remains in jeopardy," says Don Carty, American Airlines chief executive.
Elsewhere, US Airways has increased to over 100 the number of older aircraft earmarked for retirement. This will include MetroJet's entire fleet of 42 Boeing 737-200s and closing down the low-cost subsidiary operation. Other aircraft due to be phased out over the next seven months will include 40 Fokker 100s and 20 Boeing MD-80s.
Northwest is grounding 21 aircraft, comprising five McDonnell Douglas DC-10s, three DC-9s, 12 Boeing 727s and one Airbus A320. Its two regionals are also cutting back, with Express I laying off 650 staff and reducing services by 20%. Mesaba is shedding 30% of its management and cutting services by 20%.
Southwest Airlines will defer delivery of the 11 remaining 737-700s on order for this year.
Midwest Express is deferring a planned order for 20 Boeing 717s and 20 Embraer ERJ-140s.
Chief executives from American, Delta, Continental and United will forego their salaries for the remainder of the year. United has also suspended payment to its board and on any dividend on common stock through to the end of 2001.
Across the border, Air Canada and feeder Air Canada Regional plan to slash up to 9,000 jobs and ground up to 84 of their 261 aircraft in an attempt to reduce labour costs by 20%. The airline also plans a 20% cut in its schedule.
The carrier's fleet of 17 DC-9s and 38 737-200s are being grounded. Twenty 737s will eventually be used for Air Canada's low-cost startup beginning early next year. Air Canada Regional's fleet of 19 Fokker F28s will also be grounded along with its fleet of 10 BAe 146s.
Airline president Robert Milton says that with more than 50% of revenue dependent on trans-border and international traffic, Air Canada has been hard hit. He says Ottawa must act quickly to provide support now that the USA has approved its aid package.
Source: Airline Business