US aviation crisis deepens

US transport secretary Mineta (right) meets airline bosses

The US government has pledged to bail out the country's aviation industry, which is slashing jobs in a bid to avoid the catastrophic fall-out from last week's attacks.

Transportation Secretary Norman Mineta said he hoped to have a financial rescue package ready for Congress by early next week.

The industry had been having financial difficulties even before this heinous terrorist event. Those events have made the problem more acute

Norman Mineta, US transportation secretary

But he stopped short of promising the $24bn (£16.4bn) demanded by the industry.

The news came as Boeing, the world's biggest jet maker, announced it would be slashing 20,000-30,000 jobs by the end of next year as airlines cut flight schedules and aircraft orders.

And some US airlines have warned that, without a comprehensive rescue package, they may have to start filing for Chapter 11 bankruptcy protection within days.

European airlines including British Airways and Virgin Atlantic have also urged governments to ensure the region's carriers are not left at an unfair disadvantage when US aid is handed out.

Click here to see how the world's airlines are cutting costs

Security costs

America's airlines say they need help in the short term to overcome the drop in passenger numbers following last week's atrocities.

Some estimates suggest the customer downturn is costing them $1bn a day.

Carriers have said they also need longer term help in tackling increased insurance and fuel costs and tighter security.

Major US airlines have already announced more than 26,000 lay-offs, and the industry has warned that figure could grow to 100,000 in coming weeks.

Delta Airlines chief executive Leo Mullin who, with five other airline chiefs, put the industry's case to Mr Mineta, said that there was virtually no revenue for airlines in the days after the attacks.

"We anticipate that in the next few days, revenue would probably be operating at no more than 40% to 50% of normal," Mr Mullin said.

"But with the heavy fixed costs in the industry, there is no way in the long-term the industry can survive with these levels."

Government action

The US government has acknowledged the crisis in the industry.

Mr Mineta said: "The industry had been having financial difficulties even before this heinous terrorist event.

"Those events have made the problem more acute."

But he stopped short of promising all the money the industry is demanding.

Mr Mineta said there was "some recognition" within the government that airlines should be "made whole" for losses directly related to the attacks.

The industry wants $5bn in direct cash compensation.

"What we do on the balance of the project, or the package, that is something we're going to have to look at," Mr Mineta said.

Shares in US airlines, which have lost nearly half of their value in the aftermath of last week's attacks, made slight gains following news of the government's planned intervention.

Crisis spreads

The crisis in the industry is already spreading to the firms that depend on airline business.

Flags at half-mast outside Boeing's headquarters

Boeing, which supplies the bulk of the aircraft used in the US, admitted it had been forced to take drastic action.

"We profoundly regret that these actions will impact the lives of so many of our highly valued employees," said Alan Mulally, president and chief executive of Boeing Commercial Aeroplanes.

"However, it is critical that we take these necessary steps now to size the Commercial Aeroplanes business to support the difficult and uncertain environment faced by our airline customers."

Honeywell, which makes avionics, the electronic systems used in aircraft guidance, also announced it would be cutting 3,800 jobs, over and above the heavy lay-offs it has made already this year.

Blank cheque warning

Analysts are predicting a long road to recovery for the sector, which many believe was suffering from overcapacity before last week's terror attacks.

House Democratic leader Dick Gephardt, of Missouri, stressed that the airline relief package would be separate from the $40bn in emergency spending Congress passed last week to help victims of the attacks.

But advisers to President Bush voiced caution about providing federal aid to companies that faced financial problems before 11 September.

Republican lawmaker Roy Blunt of Missouri warned that the airlines should not expect a "blank cheque".

Drastic measures

Many airlines and aviation companies around the world have already taken drastic measures to cut costs:

• Aircraft giant Boeing plans to cut up to 30,000 jobs by the end of next year.
• US Airways cut 11,000 jobs and slashed its schedule by 23%.
• Continental cut 12,000 staff, reduced its schedule by 20% and postponed the flotation of its ExpressJet unit.
• United Airlines, Delta, Air Canada, American Airlines and American Air Trans all cut schedules by 20%.
• American Airlines and Northwest said they would announce cutbacks later this week
• Midwest Airways said it would abandon financial restructuring and proceed with bankruptcy immediately.
• Avionics manufacturer Honeywell said it would eliminate 12,000 jobs, almost 4,000 more than previously announced.
• British transatlantic carrier Virgin Atlantic shed 1,200 jobs
• Dutch KLM and Spain's Iberia both warned the attacks could lead them to report losses.
• German Lufthansa cut three of its transatlantic routes
• Belgium's Sabena has said that it will not last beyond the end of the year unless it manages to restructure. k
• Scandinavia's SAS, which saw its entire board resign on Monday due to an unrelated cartel scandal, said it would cut capacity in relation to the US crisis
• Irish airline Aer Lingus announced that it was to cut its operations by 25% and would let go more than 600 temporary staff.
• Air France said it was freezing hiring and retiring 17 planes from service.

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