NCPA - National Center for Policy Analysis

A Lousy Time to be an Airline

March 14, 2003

The airline industry's losses are so severe that the Air Transport Association recently used the word "nationalization." It said that once the shooting in Iraq starts, "nationalization of the industry as a result of wholesale airline bankruptcies is conceivable."

  • The last year the industry ran in the black was 2000, when it made $2.5 billion.
  • The following year it lost $7.7 billion -- followed by a loss estimated at $10 billion in 2002, and a loss of $6.7 billion is forecast for 2003.

Here are some of the factors involved.

  • Last month's Orange Alert caused advance bookings internationally to drop 20 percent.
  • As fuel prices soar, hundreds of planes have been parked -- even though lease payments must still be made.
  • Extra security has added $4 billion to the industry's cost structure.

Observers and analysts are asking what will happen if the industry doesn't survive? American Airlines has reportedly sought the kind of financing that typically precedes a bankruptcy filing.

Can one imagine a nation bereft of air service and what that would mean for the rest of the economy?

Source: Editorial, "Airline Doom?" Wall Street Journal, March 14, 2003.

For text (WSJ subscription required)

http://online.wsj.com/article/0,,SB104760560589176500-search,00.html

 

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