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Sunday, 23 December, 2001, 10:34 GMT
US attacks push airlines to the edge
Plane crashes into World Trade Centre
The moment that defined the aviation industry in 2001
By BBC News Online's Stefan Armbruster

The hijacking of four passenger aircraft for use as missiles was the defining event of the aviation industry in 2001, and the fallout has been dramatic.

Record losses, several bankruptcies and more than 200,000 job losses worldwide were headline stories which were attributed to the 11 September attacks on the US.

Heathrow departures board showing cancelled flights to US
US air space was closed for four days
But the global economic downturn, which has seen the US and Europe teetering on the edge of recession, was well underway before two jets slammed into the World Trade Center.

Airlines had already reported steep falls in passenger numbers and revenues earlier in the year and some were well into the red.

But the attacks pushed the industry over the edge after a four-day shutdown of US airspace and as passengers abandoned trans-Atlantic travel.

Industry grounded

The high profile failures of SwissAir, Belgium's Sabena, Canada 3000 and Ansett in Australia headed a list of ailing carriers across the globe.

The US government put together a $15bn compensation handout for its airlines as security and insurance costs rocketed.

Swissair tailfins
Swiss air collapsed with huge debts
But US airlines still made deep cuts to jobs and capacity across the board.

The European Commission was less generous, only allowing member states to cover losses arising from the closure of US air space.

Many European carriers also used the opportunity to cut routes and staff.

The ban on state aid has also cast a cloud over the future of flag carriers like Aer Lingus, Alitalia and Olympic.

Weak international air traffic has pushed cash losses to $15m per day at major carriers such as United and American Airlines' parent AMR, which each lost two jets in the 11 September attacks.

The US Air Transport Association forecasts its members will rack up losses of up to $9bn in 2001.

The airline trade group IATA puts the global figure at up to $12bn.

Low cost and high fliers

Amidst the chaos there were some bright spots.

Concorde takes off
Concorde returns to commercial travel
Low-cost carriers like Easyjet and Ryanair thrived as they undercut fares and carved out market share while larger rivals cut back.

Concorde returned to the skies, flying on the London to New York route more than a year after the Air France crash outside Paris.

Airlines appear confident that demand will bounce back more strongly than before 11 September, with Airbus reporting it is close to securing the 100 orders needed to launch the 550-seat A380 superjumbo.

Open skies and consolidation

Talks to liberalise travel between Europe and the US resumed, rekindling British Airway's hopes of a tie-up with American Airlines.

BA and AA tail fins
BA and AA attempt to rekindle their alliance
Meanwhile, the Commission indicated it believes that raw competition and rapid European airline consolidation is the best way to challenge the big US carriers.

Three carriers are expected to emerge as the dominant players - BA, Lufthansa and Air France.

But competition in the airline sector weakened some markets in 2001, notably Canada and Australia which are now both dominated by one player.

Privatisation misery

A number of aviation privatisations ran into trouble, were put on hold or collapsed.

The sale of Britian's air traffic control system, NATS, was a casualty of the US attacks, with revenues falling as the number of flights fell.

Air India jumbo
Air India's privatisation was grounded
The shortfall resulted in staff layoffs, little cash to upgrade infrastructure and pleas with the government to renegotiate the privatisation terms.

The sell-off of a number of state-owned flag carriers also failed due to the weak state of the airline sector.

Turkish Airlines could not attract any bidders, Air India's sale stumbled in early December when the last foreign bidder Singapore Airlines pulled out, and government wrangling over Thai Airways has left it in state hands.

Air Afrique, which is owned by 11 African states, narrowly escaped bankruptcy after a bail-out from Air France.

Outlook 2002

The first six months of 2002 are expected to remain tough as economies and vital business travel languish.

Passenger numbers are slowly rising but the cheap fares offered after 11 September mean that many airlines will not expect to make any money.

But the fifth largest US carrier, Continental Airlines, has already said the second quarter of 2002 will be profitable.

The industry should also benefit from the currently low price of jet fuel and reduced capacity, which could usher in higher fares as demand rises.

And despite ongoing losses, stock prices of many US carriers made a sharp upturn in late November.

A recovery in airline stocks typically precedes a rebound in the economy by three to six months.

See also:

07 Dec 01 | Business
Traffic grows at budget airlines
21 Nov 01 | Business
Airlines to embrace consolidation
30 Nov 01 | Business
Fresh blow for British Airways
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