Forced Nationalization of the Airline Industry


Aug 20, 2002
Major airlines say war will ''markedly accelerate'' losses
A war against Iraq would markedly accelerate the airline industry''s disintegration, leading to more than $10 billion in losses this year, 70,000 more job losses, and additional cutbacks in flights, an industry lobbying group told Congress on Tuesday.
There is serious risk of chaotic industry bankruptcies and liquidations, the Air Transport Association said. The prospect of a forced nationalization of the industry is not unrealistic.
The association''s report is the latest step the industry has taken toward asking Washington for more financial help. Airlines were already being hit by an economic recession and competition from discounters when the 2001 terrorist attacks occurred, accelerating the industry''s slide. United Airlines and US Airways are in bankruptcy, and analysts believe Fort Worth-based American Airlines could file for bankruptcy protection this year. A war could push several airlines into bankruptcy, analysts and other trade people say.
The association''s report predicted significant fallout from a war:
* Airline losses of $10.7 billion this year in what the association called the most likely scenario.
* The loss of 2,200 daily flights, including many to smaller communities.
* 70,000 job cuts.
* The more severe scenario delineates losses of $13 billion, a reduction of 3,800 daily flights and the elimination of 98,000 additional jobs, the association said.
The economic risks go far beyond the airline industry -- the stakes for the entire U.S. economy are extremely high, said James May, the association''s president and chief executive.
The report said massive economic damage to commercial aviation also will severely impact the overall economy. Multi-billion dollar losses mean air service cuts to many smaller and medium-sized communities and more unemployment throughout the economy. The tourism and hospitality industries stand to lose almost four jobs for every airline employee forced into the unemployment line.
The ATA also raised the possiblity for the second time that the U.S. government may have to partially take over insolvent airlines.