Turbulent times for US airline companies
NEW YORK : Storms, skyrocketing fuel prices, cutthroat competition and labor costs have shaped turbulent times for US airlines, and the troubles are starting to trickle down to the low-cost carriers.
Several US carriers are fighting for survival. US Airways, the seventh largest US airline, on Sunday filed for bankruptcy protection for the second time in two years after failing to sufficiently reduce costs.
Concessions close to two billion dollars from 28,000 employees starting in 2002 were not enough. David Bonner, president of US Airways' board of directors, warned since August that a second bankruptcy filing could lead to liquidation.
Delta Air Lines announced an aggressive restructuring plan Wednesday that would cut 6,000 to 7,000 jobs over the next 18 months. Delta said it was targeting more than five billion dollars in annual cash savings by 2006 and was on track to deliver nearly half of that total by the end of this year.
But Chief executive Gerald Grinstein warned that bankruptcy remains "a real possibility" for the third largest US airline, partner to European carrier Air France/KLM.
Traditional full-service carriers have not been able to recover from the September 11, 2001 attacks and recession in the United States.
A rise in tourism in 2003 brought a ray of hope but airline companies have also had to contend with cutthroat competition from low cost carriers, rising fuel prices and lingering fears and complications linked to terrorism.
The US companies also had to correct management errors, streamline their cost structures and trim their workforce, while doling out salaries and benefits to the victims of their numerous layoffs.
Nothing seemed to heal the wounds.
In early September United Airlines, which is already in bankruptcy, said it would cut more jobs to reduce costs, without stating how any. The Financial Times said it could be about 6,000 new layoffs or 10 percent of the United workforce.
Even low-cost carriers, until now unscathed compared with giants Delta, United and American Airlines, have started to feel the pinch.
Wednesday, JetBlue Airways said it was expecting profits sharply lower than expected for the third quarter of 2004 because of rising fuel costs and flights cancelled due to hurricanes in Florida over the last month.