Airlines paint gloomy picture of near-term outlook

Airline executives said Thursday that a significant turnaround in the industry's fortunes is unlikely any time soon, and they will continue to slash fares, reduce seats and prod grounded business travelers to return to the air in order to withstand the crisis.

A stream of executives from the nation's major airlines told an investors conference here that they're wrestling with the most difficult economic environment for travel since after the terror attacks of Sept. 11, 2001.

Fewer people are flying for business or pleasure as the nation remains mired in recession. The airlines took a financial hit this spring when the H1N1 virus — or swine flu — kept wary travelers off planes, particularly to Mexico. Now, rising fuel prices threaten to cut into revenue.

"It's hard to find any bullish view on a turnaround in the economy any time soon," Gary Kelly, chairman and president of Southwest Airlines luv, told a Bank of America-Merrill Lynch conference. "It's definitely an environment where we want to have an abundance of caution."

Among the steps airlines are taking in response to conditions:

•Delta Air Lines dal said it would cut more seats than planned, reducing capacity systemwide by 10% compared with last year. Available seats on international flights will be cut by 15%, 50% more than it said in March.

Starting in September, Delta will end non-stop flights from Cincinnati to London's Gatwick Airport and Frankfurt. It will reduce the number of weekly flights for those flying from Atlanta and Detroit to Mexico City.

Delta President Ed Bastian said the flu scare alone may have cost the airline $125 million to $150 million in the second quarter.

•Southwest has added fees for minors flying alone, cut flights that are not profitable, and is continuing to have fare sales as its traditionally higher-cost competitors hold sales of their own to try to win passengers.

•Continental Airlines cal is aggressively trying to get lucrative business travelers back on board. Many have been flying less because of tight corporate travel budgets.

"We're keeping a close eye on this," Continental Chairman Larry Kellner said. "We're working our business side very hard because clearly this is where we could also see a recovery much quicker if we could get the business traffic back on the airplanes."

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