U.S. Airlines Not Making Major Scheduling Changes Yet

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U.S. airlines on Thursday were assessing damage to the industry from the attack on Iraq but reported no major scheduling changes, with domestic ticket sales still weak and international bookings sharply lower.

"People are still traveling," said Carol Jouzaitis, a spokeswoman for the online travel site Orbitz. "International has been soft for weeks. Since Monday, it's dropped sharply. The international schedules are all being adjusted."

Transatlantic bookings similarly suffered the most during the 1991 Persian Gulf war. But the industry is in worse shape than it was then, with margins squeezed further as low-fare carriers are grabbing market share.

"I think we're very much still in this wait and see period," with regard to travelers' plans, said Amy Ziff, editor-at-large for another Internet travel site, Travelocity.

"We do have high call volumes, but (travelers) are finding out what their options are," she said.

While the war has just begun, airlines started feeling the effects weeks ago, with transatlantic traffic off 15 percent on average, noted Jamie Baker, analyst for J.P. Morgan.

Anticipating customer wariness, airlines recently announced relaxed cancellation policies, giving passengers one free attempt to change plans without being penalized.

That is a smart move given the uncertainty that will take a while to resolve for an industry reeling like never before, analysts said.

"We would expect demand trends to continue to worsen for the U.S. carriers," said Baker.

Shares of the world's biggest U.S. carriers, American Airlines parent AMR Corp. (AMR) and bankrupt United Airlines parent UAL Corp. (UAL) were weaker but most others were higher. The American Stock Exchange's airline was also up slightly, rising 0.8 percent to 30.13.

US Airways Group Inc. (UAWGQ), looking to emerge from bankruptcy at the end of March, said Thursday that crucial talks on a new pension plan for pilots had reached an impasse.

Two days after clearing a milestone in its reorganization plan, John Butler, the company's bankruptcy attorney, delivered a downcast report on operations at the No. 7 airline now under added pressure from the U.S.-led war in Iraq.

"On the second day of this war it is not a bright picture for the airline industry and there are issues we have to confront," the lawyer said. A US Air spokesman said bookings were down 20 percent last week and off 40 percent Wednesday.

But U.S. airlines with the heaviest exposure to the translantic market, such as US Air and industry No. 3 Delta Air Lines (DAL), still had not announced changes to their flight schedule by late Monday afternoon.

Changes were expected within days. Many U.S. corporations are telling employees to stick only to essential travel and avoid certain Middle East areas altogether.

Industry experts noted that after the Sept. 11, 2001, attacks, it took airlines as much as a week to figure out how much demand was slipping and how to deal with it.

"American Airlines has made no changes to its flight schedule at this time," spokesman Todd Burke said. "However, some changes to our future international schedule are likely."

With the war underway, it was far from business as usual, industry sources said, as various contingency plans were being reviewed in an overall extremely depressed financial environment in which sources of capital have dried up.

"I'll bet you every airline CEO is calculating daily receipts and advanced bookings and seeing how things stand over the next day, over the next week, over the next month," said an airline industry banker. "For the U.S. airlines, to have as much liquidity and cash as possible is the key; that's how an airline stays afloat.

The top U.S. carriers have lost nearly $20 billion in the last two years and have warned that 2003 earnings would be hit again as demand for tickets is expected to fall as much as 20 percent. United Airlines filed for bankruptcy in December, following US Airways' move in August.

Continental Airlines, the No. 5 U.S. carrier based in Houston, just hours before the attack began late Wednesday announced $500 million in cost cuts and 1,200 layoffs as the unprecedented aviation crisis showed no signs of abating.

Continental Chief Executive Gordon Bethune said the airline's cash was adequate for now at $1.2 billion, but it could not sit idly by and wait for help.

In Europe, the story was much the same.

Deutsche Lufthansa, Germany's largest airline, said it would look to flexible work hours to trim costs. Swiss International Air Lines laid off 169 pilots, the first of 700 previously announced job cuts.

Finnair said it, too, would open lay-off talks as the Iraq crisis worsened already grim market conditions.

To help airlines cope, the Geneva-based International Air Transport Association said more than 100 airlines had agreed to boost some international ticket prices by 2-3 percent.

Australia's Qantas Airways announced a 3 percent staff cut and Singapore Airlines Ltd. said it would cut 8 percent of its flights.