Airline execs buckle up for more turbulence NEW YORK (Reuters) =97 The U.S. airline industry slump will probably linger= =20 until at least 2005, said a majority of executives attending an annual=20 airline finance conference Monday, with more than 80% predicting another=20 major airline bankruptcy in 2003. The outlook from presenters was decidedly grim at the annual New York=20 Airfinance Journal conference here, which drew hundreds of professionals=20 from the United States and abroad. The Sept. 11, 2001, attacks, a weak=20 economy, the war in Iraq and a deadly pneumonia virus have conspired to=20 slam demand for airline tickets in what several executives referred to as=20 the "perfect storm" now blowing through the aviation market. As the=20 industry's worst crisis ever mounted in 2002, US Airways filed for Chapter= =20 11 bankruptcy protection in August. That was followed by United Airlines in= =20 December. "The difficulties and the issues that we're facing are just=20 staggering," said Hossein Amir-Aslani, head of the airline and aerospace=20 group at J.P. Morgan Chase, in opening remarks. "Frankly, one wonders what= =20 else the industry can stand." Global losses since the attacks have totaled= =20 $30 billion, which will have lasting implications on aircraft financing,=20 the role of manufacturers and lessors, Amir-Aslani said. Last week, the=20 world's largest carrier =97 American Airlines =97 narrowly avoided= bankruptcy=20 by reaching 11th hour cost-cutting agreements with its major unions. Those= =20 deals still have to be ratified by rank-and-file and American's future is=20 by no means assured. SCALING BACK FLIGHTS American Monday announced it will fly about 2% fewer domestic flights than= =20 planned in May. International flying will be about 13% lower, the=20 Fort-Worth based airline said, citing the weak economy and the Iraq war.=20 Richard Bittenbender, senior credit analyst at Moody's, said he sees no=20 recovery until several factors are mitigated =97 the fear of flying during= =20 wartime; the slow economy; and the dramatic cutback in airline capacity.=20 "People are literally, physically afraid to fly," he said. In the last two= =20 years, U.S. airlines have added $30 billion in lease-adjusted debt for a=20 total of more than $100 billion, which Bittenbender sees taking about five= =20 years to pay back. He sees airlines' liquidity recovering in the 2004 to=20 2005 time frame, earnings and cash flow in 2005 and the capital structures= =20 returning to health in 2008 to 2010. "Essentially, we have the lost=20 decade," Bittenbender said. Ray Neidl, a veteran analyst at Blaylock & Partners, has witnessed three=20 major downturns in the U.S. airline sector since the industry was=20 deregulated in 1978. "Each cycle weeds out the industry," Neidl said,=20 adding none has been quite as severe as the current one. JETBLUE TWEAKS SUCCESS John Owen, Chief Financial Officer of JetBlue Airways, told Reuters after=20 his presentation that JetBlue will "absolutely" continue making money in=20 the current downturn. JetBlue took the low-cost business model of No. 6=20 U.S. carrier Southwest Airlines Inc. and "tweaked it," in Owen's words.=20 Like Southwest, it has remained profitable since the Sept. 11, 2001,=20 attacks. JetBlue, flying Airbus A320s and operating with a nonunion=20 workforce, represents about 1% of U.S. market capacity. "It is possible in= =20 this crazy airline industry we're in to be profitable and grow and make=20 money," Owen said. Neidl attributed that largely to JetBlue's cost per=20 available seat mile (CASM) around 6.5 cents, compared with Southwest's 7.5= =20 cents and AirTran Holdings Inc.'s 8.5 cents. He predicted American's CASM=20 would still be around 9.0 to 9.5 cents even after a cost-cutting deal with= =20 unions. Even with the current cost-cutting, Neidl said major network=20 carriers such as American cannot hope to bring their costs down to the=20 level of the low-cost airlines. Neidl and Bittenbender dismissed mergers as= =20 a near-term answer for money-losing U.S. airlines. "Mergers? I don't see=20 it," said Bittenbender. "It's too expensive and just not the right fix."=20 Shares of major U.S. airlines were sharply higher on Monday, outpacing=20 broader market indexes, as investors hoped the U.S.-led war with Iraq might= =20 be close to an end. The American Stock Exchange's airline index was up=20 about 6% Monday afternoon, while the Dow Jones Industrial Average rose 1.6%= =20 to 8411.33. *************************************************** The owner of Roger's Trinbago Site/TnTisland.com Roj (Roger James) escape email mailto:ejames@xxxxxxxxx Trinbago site: www.tntisland.com Carib Brass Ctn site www.tntisland.com/caribbeanbrassconnection/ Steel Expressions www.mts.net/~ejames/se/ Site of the Week: http://www.carstt.com TnT Webdirectory: http://search.co.tt *********************************************************