AMR DOWNDRAFT
By PAUL THARP - NYPOST.COM
March 1, 2003 -- American Airlines led the troubled airlines industry into more dangerous turbulence yesterday over new fears it might file for bankruptcy.
The world's largest airline got its credit rating knocked down three notches — a serious blow not only to American but to all other all carriers facing the same cash crunch.
That's a killer cut, said credit analyst Sean Egan of Egan-Jones Ratings Co.
Air travel is drying up over Iraqi war fears, and airlines are paying double the price for a gallon of jet fuel than they did just three months ago.
Airlines are essentially broke, say analysts.
American has used up is bank credit and will almost certainly violate loan agreements, said a Standard & Poor's report that whacked the carrier's credit down to junk status.
The credit rating agency warned that American could wind up parking in bankruptcy court by start of summer's travel season if it fails to win as much as $3.8 billion in concessions from its unions.
Another struggling carrier, Northwest Airlines, moved yesterday to slash pilots' pay about 37 percent, or $2.76 billion, in order to keep up with its two main rivals — UAL and US Airways.
Those two rivals already are operating in bankruptcy and have legally slashed costs significantly to fly the same routes as Northwest.
Although solvent, Northwest says it can't keep up with the bankrupt carriers if its doesn't get big savings, too.
American's fiscal disaster added to the rising turmoil gripping the travel and aviation industry.
Atlas Air Worldwide — one of the Pentagon's key air freight carriers to the Persian Gulf — issued a triple whammy of bad news yesterday.
Atlas said the Securities and Exchange Commission is investigating the company's bookkeeping for the past 2 1/2 years. It also said it missed lease payments on planes and is giving back many of its leased and newly ordered jets to Boeing.
If Atlas sinks financially, it could harm the Iraqi war effort. The largest customer of Atlas is the U.S. Defense Department. Atlas flies Pentagon freight to Afghanistan and the Persian Gulf.
Shares of Atlas sank 17 percent to 90 cents, off 19 cents in a heavy sell-off.
Shares of America's parent, AMR, tumbled 11 percent on news of the downgrade but recovered to close at $2.34, down 17 cents, or six percent.
S&P analyst Philip Baggaley blamed the downgrade on AMR's heavy losses and diminishing liquidity, with the potential for a voluntary bankruptcy filing by midyear.
He said the carrier's losses are unsustainable, and they would certainly worsen if there is any war, or even leading up to a war.
The key period is the next several months, perhaps the next two to three months.
American is trying to extract about $1.8 billion of annual wage and benefit concessions from employees and has identified an additional $2 billion of cost cuts.
American suffered a record $3.5 billion loss in 2002. Chief Executive Donald Carty says that all airlines are really ill-equipped to deal with another major body blow like the Iraq war.
In contrast, European carriers are financially less strained . Lufthansa yesterday gave its 55,000 flight attendants and ground crews a 3.2 percent pay hike and individual bonuses averaging about $250 each.
By PAUL THARP - NYPOST.COM
March 1, 2003 -- American Airlines led the troubled airlines industry into more dangerous turbulence yesterday over new fears it might file for bankruptcy.
The world's largest airline got its credit rating knocked down three notches — a serious blow not only to American but to all other all carriers facing the same cash crunch.
That's a killer cut, said credit analyst Sean Egan of Egan-Jones Ratings Co.
Air travel is drying up over Iraqi war fears, and airlines are paying double the price for a gallon of jet fuel than they did just three months ago.
Airlines are essentially broke, say analysts.
American has used up is bank credit and will almost certainly violate loan agreements, said a Standard & Poor's report that whacked the carrier's credit down to junk status.
The credit rating agency warned that American could wind up parking in bankruptcy court by start of summer's travel season if it fails to win as much as $3.8 billion in concessions from its unions.
Another struggling carrier, Northwest Airlines, moved yesterday to slash pilots' pay about 37 percent, or $2.76 billion, in order to keep up with its two main rivals — UAL and US Airways.
Those two rivals already are operating in bankruptcy and have legally slashed costs significantly to fly the same routes as Northwest.
Although solvent, Northwest says it can't keep up with the bankrupt carriers if its doesn't get big savings, too.
American's fiscal disaster added to the rising turmoil gripping the travel and aviation industry.
Atlas Air Worldwide — one of the Pentagon's key air freight carriers to the Persian Gulf — issued a triple whammy of bad news yesterday.
Atlas said the Securities and Exchange Commission is investigating the company's bookkeeping for the past 2 1/2 years. It also said it missed lease payments on planes and is giving back many of its leased and newly ordered jets to Boeing.
If Atlas sinks financially, it could harm the Iraqi war effort. The largest customer of Atlas is the U.S. Defense Department. Atlas flies Pentagon freight to Afghanistan and the Persian Gulf.
Shares of Atlas sank 17 percent to 90 cents, off 19 cents in a heavy sell-off.
Shares of America's parent, AMR, tumbled 11 percent on news of the downgrade but recovered to close at $2.34, down 17 cents, or six percent.
S&P analyst Philip Baggaley blamed the downgrade on AMR's heavy losses and diminishing liquidity, with the potential for a voluntary bankruptcy filing by midyear.
He said the carrier's losses are unsustainable, and they would certainly worsen if there is any war, or even leading up to a war.
The key period is the next several months, perhaps the next two to three months.
American is trying to extract about $1.8 billion of annual wage and benefit concessions from employees and has identified an additional $2 billion of cost cuts.
American suffered a record $3.5 billion loss in 2002. Chief Executive Donald Carty says that all airlines are really ill-equipped to deal with another major body blow like the Iraq war.
In contrast, European carriers are financially less strained . Lufthansa yesterday gave its 55,000 flight attendants and ground crews a 3.2 percent pay hike and individual bonuses averaging about $250 each.
