Airline Industry Slump to Linger

NEW YORK —  The U.S. airline industry slump will probably linger until at least 2005, said a majority of executives attending an annual airline finance conference Monday, with more than 80% predicting another major airline bankruptcy filing in 2003.

The outlook from presenters was decidedly grim at the annual New York Airfinance Journal conference here, which drew hundreds of professionals from the United States and abroad.

The Sept. 11 attacks, a weak economy, the war in Iraq and a deadly pneumonia virus have conspired to slam demand for airline tickets in what several executives referred to as the “perfect storm” blowing through the aviation market.

Passenger traffic on U.S. airlines fell 11.5% in the week ended March 30, the first full week after the Iraq conflict began, according to the Air Transport Assn., the trade group of the major airlines. Travel on transatlantic and transpacific routes fell 19%.

“The difficulties and the issues that we’re facing are just staggering,” said Hossein Amir-Aslani, head of the airline and aerospace group at J.P. Morgan Chase & Co. “Frankly, one wonders what else the industry can stand.”

Global losses, which since the attacks have totaled $30 billion, will have lasting implications on aircraft financing, the role of manufacturers and lessors, Amir-Aslani said.

Last week, the world’s largest carrier -- American Airlines parent AMR Corp. -- narrowly avoided a bankruptcy filing by reaching eleventh-hour cost-cutting agreements with its major unions. United Airlines’ parent, UAL Corp., has been in bankruptcy protection since December.

Meanwhile, American announced that it would fly about 2% fewer domestic flights than planned in May. International flying will be about 13% lower, the Fort Worth-based airline said.

Also, Continental Airlines said that it would suspend nonstop flights between New York and Hong Kong because of passenger fear about SARS, or severe acute respiratory syndrome.

Richard Bittenbender, Moody’s senior credit analyst, said he sees airlines’ liquidity recovering in 2004 to 2005, earnings and cash flow in 2005 and capital structures in 2008 to 2010.

“Essentially, we have the lost decade,” Bittenbender said.

Shares of major U.S. airlines were sharply higher Monday, outpacing broader market indexes, as investors hoped the U.S.-led war with Iraq might be close to an end.