=20 ---------------------------------------------------------------------- This article was sent to you by someone who found it on SF Gate. The original article can be found on SFGate.com here: http://www.sfgate.com/cgi-bin/article.cgi?file=3D/chronicle/archive/2002/10= /18/BU46889.DTL ---------------------------------------------------------------------- Friday, October 18, 2002 (SF Chronicle) Losing altitude - fast/Ailing economy, terror attacks' aftermath bring indu= stry to its knees David Armstrong, Chronicle Staff Writer The cascade of bad news for the nation's ailing airlines continued Thursday, as third-quarter losses dogged major carriers. Even reliably profitable Southwest Airlines, one of the industry's few bright spots, said it is unsure whether it can turn a profit in the fourth quarter. Continental Airlines reported a $37 million loss in the third quarter, while Northwest Airlines indicated it was $46 million in the red. Separately, Delta Air Lines, after reporting a third-quarter loss of $324 million earlier in the week, Thursday said it will slash its workforce by 8, 000 employees. That will bring the number of jobs lost in the past year at Delta, the nation's third-largest carrier, to 21,000 -- 25 percent of its workforce. And it could get worse. Analysts expect United Airlines, the nation's No. 2 carrier, to report today a $510 million loss in third quarter, according to Thomson First Call. United said Thursday it will scrap the customary conference call with analysts and journalists following the release of its earnings results, noting "it will be scheduled for a time in the near future when the company will be able to discuss greater details of its financial recovery plan." United has said for weeks that its wobbly finances may force it to seek Chapter 11 bankruptcy protection, following US Airways, which filed for Chapter 11 in August. Bucking the trend, maverick carrier Southwest recorded its 46th consecutive profitable quarter Thursday, earning $75 million. But that was just half of what Southwest made in the third quarter of 2001, even after the Sept. 11 terrorist attacks hammered profits throughout the industry. James Parker, Southwest's president and chief executive officer, said he is unsure whether Southwest could keep it up and make any money in the fourth quarter of this year. "The airline environment remains a challenge," Parker said in a statemen= t. "Our traffic was negatively affected by the Sept. 11 anniversary, with customers traveling much less during much of September 2002." Parker pointed to increased security costs, pending wage increases for Southwest's mechanics and pilots, and possible war with Iraq as factors pushing down fourth-quarter revenue. "It is impossible to predict whether we will earn a profit in fourth-quarter 2002," he said. The airline industry has been hit hard by increased security costs and fear of flying prompted by Sept. 11. It also flew into financial turbulence during the recession that began well before Sept. 11. The slumping economy reduced lucrative business travel and drove customers to seek bargain fares. These factors combined to inflict $7.1 billion in losses on U.S. carriers in 2001. In response, industry capacity was cut 20 percent and most airlines trimmed their staffs by a similar percentage. Many orders for new aircraft were canceled or delayed, and existing planes taken out of service were banished to the Mojave Desert and parked indefinitely. Industry observers say airline losses could climb even higher this year. Prominent UBS Warburg analyst Sam Buttrick has predicted losses of $8 billion in 2002. The terrible third-quarter news began arriving on Wednesday, when Americ= an Airlines, the world's largest carrier, reported a staggering $924 million loss. "Any way you look at them, these are terrible financial results that reflect a sluggish economy, continued weakness in the revenue environment, high fuel prices, the cost of enhanced security and the uncertainty of events in the Middle East," said Donald Carty, American's chairman and chief executive. Southwest, the nation's No. 6 carrier and a pioneer in low-fare, no-fril= ls service, is the only major airline still making money, although its profit is shrinking. The Dallas carrier's third-quarter profit was $75 million (9 cents per share) in the third quarter, down from $151 million (9 cents) in the same year- ago period. "I am pleased with the results in this environment," Blaylock & Partners airline analyst Ray Neidl told Bloomberg News. "(But) These results on a long- term basis are disappointing." Southwest, a major carrier in the Bay Area, operates 120 daily departures to 19 cities from Oakland International Airport, where it is the largest airline, and 74 daily departures to 11 cities from Mineta San Jose International Airport. (Southwest pulled out of San Francisco International Airport, Northern California's largest airport, in early 2001, citing SFO's chronic problems with flight delays.) Despite the carrier's cloudy financial results, Southwest spokeswoman Whitney Eichinger said the airline still plans to begin a previously announced daily flight between San Jose and Baltimore-Washington International Airport on Jan. 13, and has no plans to change staffing levels. "We have been consistent since Sept. 11 in not furloughing any employees, and we plan to continue with that. We don't plan to add any, either," Eichinger said. Tough times for U.S. airline industry Source: The companies Three major domestic carriers reported a third-quarter loss Thursday, a day after American Airlines said it lost almost =D0$1 billion in the July-September period and two days after Delta Air Lines also reported a loss. Southwest Airlines, the only carrier to show a profit, said its net income was reduced by half from a year ago. United Airlines is to release its earnings today. Airline 3rd quarter 2002 3rd quarter 2001 (losses in bold type) (in millions) (in millions) American -$924 -$414 America West -31 -31.7 Continental -37 3 Delta -324 -259 Northwest -46 19 Southwest 75 151 Chronicle Graphic Chronicle news services contributed to this report. E-mail David Armstro= ng at davidarmstrong@sfchronicle.com.=20 ---------------------------------------------------------------------- Copyright 2002 SF Chronicle