Global airline crisis claims another victim

  • Business
  • Thursday, 03 Apr 2003

CHICAGO: Air Canada has filed for bankruptcy protection and more major airlines have announced cuts in jobs and flights to cope with the crisis in global aviation made worse by the Iraq war. 

Never in the history of the industry has it been hit with so many negative factors out of its control, and there are fears that more of the world’s leading airlines could be forced into bankruptcy. 

The spiral began with a slump in travel after the Sept 11, 2001, terror attacks on the United States, a slowdown in the world economy, a rise in aviation fuel prices, the outbreak of the deadly severe acute respiratory syndrome (SARS) in Asia that has further discouraged travel, and a war in Iraq that has inflamed the Middle East. 

Canada's largest airline cited all those setbacks in filing for protection under the country's Companies' Creditors Arrangement Act on Tuesday, the first major airline to succumb to bankruptcy since the start of the Iraq war. 

But Air Canada said its aircraft would keep flying as it negotiated to restructure almost C$13bil of debt. The bankruptcy protection will last until May 1. 

An Air Canada ticket agent works behind a counter at the Ottawa airport.

Air Canada's move came just one day after the world’s largest carrier, American Airlines, narrowly averted a similar fate by striking deals with major labour unions to sharply cut costs. 

The union representing pilots at American said about 2,500 of its members would be furloughed or retire over the next year as part of the deals. 

The world’s No. 2 airline, UAL Corp’s United Airlines, is already under US bankruptcy protection and struggling to restructure.  

Analysts predict more carriers could be forced into bankruptcy if the Iraq war drags on. 

US Airways Group Inc, meanwhile, emerged from bankruptcy on Monday as a leaner, more efficient, but still money-losing carrier. 

“My enthusiasm is tempered by the fact we are emerging in the most challenging of industry times, and the restructuring is not done,” chief executive David Siegel said. “We’re just drowning, but closer to the surface.” 

More major airlines joined in a chorus of cuts in flight schedules and jobs this week as they struggled to offset the decline in travel. Companies are discouraging all but essential air travel and many tourists have put off or cancelled trips. 

In Europe, KLM Royal Dutch Airlines said it would soon implement “far-reaching measures” to cut unit costs by 10% and could not rule out layoffs.  

The announcement followed similar moves by other major European airlines, including British Airways, Air France and Germany’s Lufthansa. 

In the US, Continental Airlines said it planned to trim its summer schedule by 2% because of poor demand and would have to cut more jobs than the 1,200 announced last month. 

All the major US airlines have trimmed schedules since the Iraq war started, and several have announced job cuts. So have many Asian airlines, mainly because the SARS scare has led to a sharp drop in air travel. – Reuters  

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