KAREN WALKER / WASHINGTON DC
Unions are sceptical, anticipating a plea for pay and benefits concessions to bail out troubled carrier
Major airlines in the USA are set to turn in what could be the worst set of financial results in industry history. The chief executive of the world's largest operator, United Airlines, warns that the carrier will not survive if it continues to bleed money at the current rate.
United chief executive James Goodwin stunned employees at the Star Alliance airline last week by distributing a letter stating the carrier "will perish" next year if the losses do not stop. "We are literally haemorrhaging money," he says.
Even before the 11 September terrorist attacks, United was projected to lose $1 billion this year. The carrier says that additional losses as a result of the attacks and subsequent slump in demand - especially high-yield business travel - is likely to exceed the $800 million the airline will receive as its part of the US Government's bailout payment to carriers. The statement mirrors a similar warning by American Airlines made since 11 September.
Employees and analysts are sceptical of Goodwin's claims, however. Most analysts are interpreting his remarks as a precursor to a call to employee union groups for pay and benefits concessions to help assist the airline through its financial crisis.
Salomon Smith Barney's Brian Harris says he does not expect United to "perish" and that a combination of revenue claw back and cost reductions will be sufficient for most US majors, including United, to survive.
Goodwin's remarks have caused union anger, with some calling for his resignation. One union accused him of "a number of mind-numbingly irresponsible financial decisions" over the past year.
Nevertheless, the picture that will emerge over the next two weeks as US carriers report their third quarter earnings will show the depth of the problem. While Southwest Airlines last week posted a $184 million net profit for the period - and would have been profitable even without its $169 million bailout payment from the government - the Dallas-based carrier could prove to be a lone star.
Even Southwest warns that its yields must improve if it is to stay profitable. The airline estimates it lost $25 million as a result of the grounding, and has lost a further $95 million for the rest of the quarter. Load factors slumped from the around 75% to 45% between 14 and 30 September, although they say there are some signs of recovery, reaching as high as 67% in the second week of October.
Source: Flight International
