American, United airlines announce 40,000 layoffs
Thursday, September 20, 2001
SEATTLE -- American and United airlines announced 40,000 layoffs Wednesday as the U.S. aviation industry sank deeper into a crisis touched off by the terrorist attacks.
The parent company of American, the world's largest airline, said it will lay off at least 20,000, or 14 percent, of its 138,350 workers. The cuts by AMR Corp. will affect American, TWA and American Eagle.
United parent UAL Corp. matched the bad news little more than 90 minutes later, saying it would lay off 20,000 of its 100,000 workers. Just a day earlier, Boeing said it planned to trim 30,000 thousand jobs by the end of next year.
"This is not a ripple effect," said Rep. Jennifer Dunn, whose suburban Seattle district includes thousands of Boeing workers. "This is a tsunami."
In little more than a week, the attacks have cost the struggling U.S. aviation industry nearly 70,000 jobs and billions of dollars in vanished business.
Airlines warn the layoffs could rise to 100,000 and are asking for $17.5 billion in federal aid to keep them from ruin. The air carriers initially had asked for $24 billion while the House had suggested $15 billion.
Late Wednesday, the Bush administration said it plans to ask Congress to give the airlines $5 billion in immediate aid. A decision whether to give another $12.5 billion in credits and loans to the industry would be made later.
It's not just the airlines that are in trouble: Boeing, the No. 1 maker of passenger jets, said Tuesday it will scale back deliveries and lay off up to 30,000 of its 93,000 commercial airline workers by the end of next year.
Airlines and their suppliers already were hurting from a slowing economy that had businesses cutting back on flights and tourists scaling back vacation plans.
Then came the Sept. 11 attack by terrorists using four hijacked Boeing airliners, the unprecedented two-day ban on commercial flights and expensive new security measures for travelers and airports.
Air travel has remained a shadow of what it was and airlines -- including Continental, Delta and Northwest -- have scrambled to cut routes and, in some cases, jobs. On Wall Street, airline stocks took severe blows Monday though most, including AMR, posted slight gains Tuesday and Wednesday.
American Airlines chairman Donald Carty said the Texas-based company was in a state of emergency.
"This declaration is an official recognition that -- hard as it may be to accept -- our company's very survival depends on dramatic change to our operations, our schedule, and worst of all our staffing levels," he told employees.
Analysts warn the industry's woes could spread to everyone from parts suppliers to travel agencies.
"It's going to reverberate through the entire system," said Paul Nisbet, an aviation analyst with JSA Research.
"We were having a slowdown, but it was a controlled slowdown as a result of the poor economy," Nisbet said. "This made it almost what you would call a panic slowdown."
United, based in Elk Grove, Ill., has been harder hit by the disaster than other carriers. Not only were two of its flights involved, but it relies more than others on revenue from business travel.
United had been on pace to lose about $1 billion this year due to the economic downturn and steep labor costs; analysts now say it could lose that much in the second half of the year alone. Its stock has plummeted 39 percent this week.
Foreign airlines likewise are suffering, with Virgin Atlantic, Dutch carrier KLM, Air France and Germany's Lufthansa among those saying they are scaling back routes, freezing hiring or cutting jobs and rethinking whether they can buy new aircraft.
Northwest spokesman Doug Killian noted that airlines also were hard-hit during the Gulf War 10 years ago, when the industry lost $4.7 billion due to a recession and fear of flying.
"That was a greater loss than the combined profit for the industry in its history since the days of Kitty Hawk," Killian said. "You can certainly look at some past events and see what they did to this industry."
Related industries also feel the pinch. Sabre Holdings Corp., the nation's largest hotel and airline reservation system, reduced earnings expectations Wednesday.
Trying desperately to convey some optimism, Boeing Commercial president and chief executive Alan Mulally said Boeing would go forward with plans to build the new Sonic Cruiser, an airplane that could fly at nearly the speed of sound.
He also said the company has no immediate plans to close any plants, though Boeing may end up delivering 500 commercial jets this year instead of the expected 538.
"I'm hopeful that this is a one, two-year thing," Mulally said. But he admitted this is an unprecedented event.
"Nobody ever anticipated this kind of a terrorist attack," he said. "This is absolutely gut-wrenching."