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STRATFOR.com
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THE INTERNET SOURCE FOR GLOBAL INTELLIGENCE
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With Bailout, U.S. Airline Industry Should Recover
September 24, 2001
Summary
The terror attacks of Sept. 11 have thrown America's airline industry into disarray. Fortunately for both the industry and the American economy, the U.S. government has the capacity to quickly address the issue with a mammoth bailout package.
Analysis
U.S. President George W. Bush signed a $15 billion airline relief bill into law Sept. 23 after largely superficial debate in both houses of Congress.
Airlines the world over face a bleak future. The global slowdown and rising fuel costs had already pushed much of the sector to the brink of bankruptcy. American carriers alone were on track for a total industry loss of $3 billion before the Sept. 11 suicide hijackings. Losses now could mount to $6 billion or more, Reuters reported Sept. 24. The federal government's speedy action underscores the industry's importance to the American economy. The bailout should provide the financial bulwark to prevent a collapse.
Until the measure became law, there was little light on the runway. During congressional testimony, airline executives declared they expect to lose $4.7 billion from the date of the attacks through the end of September. United Airlines projects that added insurance costs for airlines will jump by an extra $1 billion in the short term.
Consumer confidence in the industry is also at a low. Planes belonging to the country's two largest carriers, American Airlines and United Airlines, took down the World Trade Center towers and slammed into the Pentagon. In the aftermath of the attacks, Bush gave orders to shoot down any passenger flights that did not respond to air traffic controllers. Despite the necessity of the order, it is hardly what the one-third of travelers who are vacationers want to hear as they plan their trips.
(The Rest of the Story)
(c) 2001 Stratfor, Inc.
Dan
With Bailout, U.S. Airline Industry Should Recover . . .