This article from NYTimes.com has been sent to you by psa188@xxxxxxxxx No Peace Bounce for Airlines April 11, 2003 By MICHELINE MAYNARD The nation's airlines, which blamed the war in Iraq for a plunge in business that forced the layoffs of more than 10,000 employees and the elimination of dozens of flights, are not expecting the postwar era to be much brighter. The weak economy, continued fears over terrorism and the complicating factor of the mysterious illness SARS, or severe acute respiratory syndrome, are likely to offset any increase in travel that could be expected once it is clear that the conflict in Iraq has subsided, industry officials and analysts said yesterday. "We are not planning or counting on any bounce back," said Douglas A. Hacker, executive vice president of United Airlines, a unit of the UAL Corporation and the No. 2 carrier behind American Airlines. E. Han Kim, professor of finance at the University of Michigan Business School, explained the predicament for airlines. "Everything being equal, I would say, yes, the airlines would come back, but everything is not equal," he said. "SARS is hurting some airlines just as much as the war and, unfortunately, you can't bomb SARS." Indeed, Mr. Hacker said in an interview yesterday that SARS, which had its first outbreaks in Asia and is highly contagious, was having the same effect on United's Pacific routes as the war was having on its traffic across the Atlantic. "What it looks like is kind of a continuation of war" on Pacific travel, Mr. Hacker said. The complexities involving overseas travel have made it difficult for any airline to plan for the next few months, United included, he added. "In this kind of environment, you can't have a forecast," Mr. Hacker said. "Our crystal ball remains pretty cloudy. We're kind of getting used to that. Our main theme is, `Let's work against a pretty ugly scenario.' " Even under more normal conditions, this time of year has typically been one of the most sluggish travel periods. While traffic usually increases slightly during the weeks around Easter and Passover, it is generally slow until the middle of May, when colleges end classes for the year and family vacations begin. This year, officials at airlines, rental car companies and other travel businesses say advance reservations for later in the spring and summer are relatively weak. Travelers have delayed booking their trips even longer than usual. So, even with the war appearing to be close to conclusion, airlines can expect that travel will be soft for the next six weeks, and possibly longer, said Sandy Rederer, an aviation consultant in Arlington, Va. "My guess is that we remain semi-mired for some time," Mr. Rederer said. "There will be a lag before people get over the deferral of travel that was delayed before the war." John Heimlich, an economist with the Air Transport Association, a trade group, agreed that the short-term outlook was gloomy. Fare discounts can be expected to draw some passengers back, he said, but at a cost. "I think what we'll see in the next several weeks is that volumes will start to improve at much lower fares per mile." In reality, the last thing the industry would want, politically, would be a strong rebound in travel. Airlines have been lobbying for a $3 billion relief package that would include assistance for more than 10,000 workers who have been furloughed since the start of the war, on top of 100,000 who have lost their jobs since the Sept. 11, 2001, attacks. The House and Senate have passed slightly different measures that have been folded into legislation financing the war; that legislation is now being considered by a conference committee of the two bodies. The White House, however, has called the package too generous, and the potential bailout has prompted debate over whether the war was to blame for the airlines' problems or whether they stem from business decisions. "That's the business they're in, and war is part of the risk," said Kevin Mitchell, president of the Business Travel Coalition, which represents corporate travel departments and business travelers. Mr. Mitchell argued in testimony before Congress that the airlines did not warrant help unless they took steps to limit executives' salaries and imposed other streamlining measures. Lately, a number of airline executives have taken salary reductions, after cutting the pay of employees in the wake of the war. On Wednesday, the air transport association released figures showing that the war had caused the steepest drops in travel this year, though it said that SARS was having an effect as well. For the week ended Sunday, the group cited a year-over-year 17.4 percent decline in overall travel, including domestic and international routes. Domestic travel fell 14 percent during the week, while the Asia-Pacific region was off more than 25 percent. During the week of March 23, there was a 10 percent decline for overall travel. Mr. Heimlich said the declines were even more significant given that traffic had risen in the first couple of months of 2003, although from mediocre levels in 2002. Robert Mann Jr., an aviation consultant based in Port Washington, N.Y., said SARS was having a substantial effect. "We've seen disruptions of service that even exceed the reduction in schedules due to the economy and the conflict in the Middle East," he said. Mr. Mann said he was particularly concerned about the effect of the respiratory illness on United, which filed for Chapter 11 bankruptcy in December, well before the war began, and provides service to Asia. The other major United States carrier to do so is Northwest Airlines. He and other analysts have expressed concern that the drop in travel could be another obstacle in United's bankruptcy revamping. "For United, it's, `Gosh what else? Will it be the locusts next?' " Mr. Mann said. That is overstating United's predicament, Mr. Hacker said. "We are more optimistic about the more rapid return of domestic bookings and revenue than we are internationally," he said. http://www.nytimes.com/2003/04/11/business/11AIR.html?ex=1051068303&ei=1&en=43087c05fc4f878f HOW TO ADVERTISE --------------------------------- For information on advertising in e-mail newsletters or other creative advertising opportunities with The New York Times on the Web, please contact onlinesales@xxxxxxxxxxx or visit our online media kit at http://www.nytimes.com/adinfo For general information about NYTimes.com, write to help@xxxxxxxxxxxx Copyright 2003 The New York Times Company