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Airlines make bailout plea
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September 18, 2001: 3:36 p.m. ET
Executives meet with government officials, seek $24B in assistance
By Staff Writer Chris Isidore
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NEW YORK (CNNfn) - The top executives of the nation's major airlines came to Washington seeking up to $24 billion in help and found sympathetic ears but no firm dollar promises.
The executives met at the White House with Transportation Secretary Norman Mineta, Bush's chief economic advisor Lawrence Lindsey, and members of the president's National Economic Council to seek support for the package that would include $5 billion in direct aid, $7.8 billion in relief from certain taxes, such as the federal aviation fuel tax, and $11.2 billion in loan guarantees and grants.
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Delta Air Lines CEO Leo Mullin speaks outside the White House Tuesday about the airline's request for a federal bailout as Transportation Secretary Norman Mineta, left, looks on. | |
The words of support apparently helped lift most stocks in the sector after the first day of trading since last week's terrorist attacks cut most airlines stock values by between a third to a half in Monday's sell off. But the rebound was modest in comparison with Monday's decline.
The nation's airlines have said they face a severe cash crunch due to the almost total absence of new ticket sales since last week's terrorist attack involving four hijacked jetliners.
The airlines saw almost four days with virtually no ticket sales last week, Leo Mullin, CEO of Delta Air Lines (DAL: up $2.29 to $22.93, Research, Estimates) said in comments outside the White House after meeting with administration officials. He said sales since then have only reached 40-to-50 percent of normal, even as most carriers approached about 80 percent of their normal schedule.
"There is no way in the long term our industry can survive at those levels," he told reporters.
Mullin also said that the industry is pleased with the level of support is has received from both the administration and congressional leaders, and Mineta told reporters the administration is committed to some kind of assistance to compensate carriers at least for the grounding of aircraft for two days last week. He said he thought some kind of aid package could get through Congress as soon as early next week.
"It's too premature to come up with the details of what the package will look like," Mineta said. "The overall data shows there's no question that last Tuesday's events had a tremendous impact on the aviation business in terms of having fixed costs they have to pay for on a daily basis and no revenue coming in. They had some very immediate needs."
Mullin said the $24 billion figure as the top end of the help that would be needed by the industry.
"Obviously those estimates are based on revenue projections very uncertain at this time," he said.
Analysts said Tuesday that financial outlook varies greatly from airline to airline, depending upon their balance sheet. Michael Linenberg, analyst for Merrill Lynch, said his estimate shows that the industry is now on track for $6.5 billion in losses, up from his previous estimate of $2.2 billion in losses. He also put all North American airline stocks under review, meaning he had no recommendation any of them.
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"The next several weeks will be critical for the U.S. airline industry," Linenberg wrote to clients this week. "If industry fundamentals remain severely depressed, with no rebound in site, and government assistance is not an option, then we think it is only a short period of time before carriers are forced to file for bankruptcy." But he said he too believes some level of assistance is likely.
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Linenberg said United Airlines parent UAL Corp. (UAL: up $1.49 to $18.99, Research, Estimates) and America West Airlines Holdings (AWA: up $0.30 to $3.30, Research, Estimates) each have the thinnest margin to operate, with only a little more than three weeks worth of operating cash on hands to fund operations.
AMR Corp. (AMR: up $2.00 to $20.00, Research, Estimates), the world's largest airline company and owner of American Airlines and Trans World Airlines, has about five weeks of cash available, according to Linenberg's analysis, while Delta and No. 5 Continental Airlines (CAL: down $2.33 to $17.72, Research, Estimates) have about six weeks of cash.
Linenberg said among the best positioned to ride out the crisis are regional carriers and discount carrier Southwest Airlines (LUV: down $0.01 to $12.99, Research, Estimates) the nation's most profitable airline. It has nearly three months of cash on hand, according to his analysis.
Continental, which along Southwest are the nation's only profitable major carriers before the terrorist attack, warned Monday it will miss $70 million in payments on aircraft-backed loans.
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United Airlines said it expects to get all its grounded jets back in the air by Wednesday. | |
Deep layoffs and schedule reductions are spreading across the industry, led by Continental, which Saturday announced it would cut its schedule and staff by about 20 percent.
Sources told CNN Tuesday that United was on the verge of furloughing 20,000 of its employees, although company officials could not be reached for confirmation.
United said Tuesday it expects to run 1,900 flights Wednesday, about 20 percent less than its full schedule of 2,390 flights. United said it expected to have 1,270 flights Tuesday after having only 1,045 Monday.
Other members of the administration also said the president supports some kind of relief for the airlines, although they were careful to say it was premature to say what level of help would be endorsed.
"He understands what's happened to this sector of our economy, he understands that the rules have changed for them this last week and it is appropriate that the federal government step in and give them some support," said Commerce Secretary Don Evans in an interview with CNN on the White House lawn early Tuesday.
The bailout package also won support from some congressional leaders Tuesday afternoon.
"There's a recognition of the extraordinary vulnerability we see economically with all the airlines," said Senate Majority Leader Tom Daschle. "Clearly this is a vital part of our restoring our economic health and strength." But Congressional leaders also stopped short of backing a specific dollar amount for the package.
The bailout package would help not only passenger carriers but also air cargo carriers, which have bounced back from the crisis much quicker than the passenger airlines. The major cargo carriers such as FedEx Corp. (FDX: down $2.40 to $35.90, Research, Estimates) United Parcel Service (UPS: down $0.22 to $50.15, Research, Estimates) and Atlas Air (CGO: up $0.11 to $11.19, Research, Estimates) may actually benefit if cargo that had traveled in the bellies of passenger planes ends up shifted to their freighters due to security concerns. But Mineta said any relief package would include cargo carriers as well as small aircraft operators. 
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Lawmakers lobby for airlines - Sept. 17, 2001
Airline stocks see steep selloff - Sept. 17, 2001
Continental slashes staff, flights - Sept. 15, 2001
Airlines' cash will last only 30 days - Sept. 14, 2001
Air travel will suffer - Sept. 13, 2001
Midway ceases operations - Sept. 12, 2001
AMR Corp. warns of wider-than-expected 3Q loss - Sept. 7, 2001
Skies safe from layoffs despite losses - Aug. 24, 2001
Merrill widens forecasts for airline losses - Aug. 21, 2001
US Airways unveils plan to cut costs - Aug. 15, 2001
American grounds jets as demand falls - Aug. 20, 2001
Losses widen for airlines - July 18, 2001
Airline losses fly over 1Q forecasts - Apr. 18, 2001
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