NEW YORK (CNN/Money) -
A war in Iraq could be the final knockout punch for some of the embattled carriers in a U.S. airline industry already staggering from the Sept. 11 attacks and a weak economy.
The airlines are expected to see further declines in air travel during the duration of fighting in Iraq -- which could begin at almost any moment -- especially on trans-Atlantic routes.
Though oil prices have fallen recently, any disruption of supply caused by the war would boost them again, causing a spike in fuel prices, the second-largest expense for air carriers, after labor.
The war comes at a time when two major carriers -- United Airlines parent UAL Corp. (UAL: Research, Estimates) and US Airways Group -- already are operating under bankruptcy court protection, and other major carriers, including AMR Corp.'s (AMR: Research, Estimates) American Airlines, are teetering on the edge of a filing. Some industry experts expect there to be more bankruptcies as the war progresses, especially if it does not end quickly.
"If it looks like revenues are going to fall precipitously, it'll be a stampede to (the) courthouse," said Michael Boyd, president of the Boyd Group, a Colorado airline consulting firm. "Airlines are going to want to protect their assets. I would imagine most major airlines already have the paperwork in hand."
On Tuesday, a day after President Bush called for Saddam Hussein to leave Iraq or face war, Continental Airlines Inc. (CAL: Research, Estimates), British Airways PLC (BAB: Research, Estimates) and Swiss International Air Lines announced cutbacks in some international flights.
United said it was closely monitoring air traffic before it decides whether or not to cut flights. Like US Airways and American Airlines, it's letting passengers change travel plans without the usual change fees.
American and Southwest Airlines Inc. (LUV: Research, Estimates) said they're waiting for fighting to start before making that decision, while US Airways has said it doesn't plan to cut flights, according to a New York Times report.
The Air Transport Association (ATA), the trade group for airlines, also is urging that fuel taxes be suspended and that oil be released from the U.S. strategic oil reserve to try to control fuel prices.
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The first Gulf War helped bring six major carriers to their knees. Continental and Pan Am both filed for bankruptcy protection between the Iraq invasion of Kuwait in August 1990 and the start of U.S. attacks on Iraq Jan. 16. Eastern Airlines, which had filed for bankruptcy protection in March 1989, was forced to liquidate, flying its last flight Jan. 18, immediately after the start of fighting. America West, TWA and Midway Airlines all filed for bankruptcy within a year of the start of fighting.
The ATA estimates that the war could cost the industry $4 billion in additional losses every quarter, with half of that from increased fuel, the other half from lost revenue. That compares to about $10 billion in losses in 2002, and on top of estimated losses of $4 billion to $6 billion this year without a war.
During the first Gulf War, miles flown on U.S. airlines were off 7 percent in February 1991, with a 44 percent drop in trans-Atlantic traffic and a 21 percent drop in trans-Pacific routes.
Even though the three-day ground war brought a quick conclusion to the fighting by Feb. 27, overall fares and international traffic stayed below year-earlier levels throughout the first and second quarters of '91. Airlines admit they're worried that customers will be even more nervous about returning to the air this time around.
"I would imagine, because of 9/11, there could be a greater drop off this time than last time," said American Airlines spokesman John Hotard. "We won't really know it until it starts."