Travel Industry Suffers From War With Iraq

March 27, 2003 -- New numbers from the airline industry show it is already being affected by the war in Iraq.

Air travel last week was down 10 percent from the same time a year ago, according to the Air Transport Association, a Washington-based industry trade group. Hardest hit were trips across the Atlantic, which were down 25 percent. Domestic travel was down 7 percent, with Pacific trips off 13 percent and Latin American markets down 8 percent.

And advance bookings for the next 60 to 90 days are even worse, said the ATA. Domestic bookings are off 20 percent, with bookings for Atlantic trips off 40 percent.

The war "is affecting international routes far more than domestic routes. But unlike the [1991] Gulf War, the domestic routes have been hit very hard, approaching double-digit numbers," said James May, ATA president and chief executive officer.

The industry says travel began to drop off with the first "Code Orange" security alert, but fell dramatically after President Bush's war summit in the Azores with leaders of Britain, Spain and Portugal.

That was March 16. Two days later, on Monday the 18, President Bush issued his ultimatum to Saddam Hussein to leave the country within 48 hours or face war.

On that day, travel was down 7.7 percent over a year earlier. The next day, it fell 11 percent. On March 19, the day the ultimatum expired, travel on U.S. airlines dropped 15 percent.

Anticipating declines, airlines last week reduced flights by as much as 12 percent. They also cut 10,000 jobs. The industry has predicted that a protracted war could lead to 70,000 layoffs and the elimination of 2,200 flights.

Long Wave of Troubles

Even before the war, the industry said it would lose $6 billion this year, and predicted that a war could more than double that number.

Airlines are lobbying hard on Capitol Hill for help. They want $4 billion to cover increased security costs, which have gone up dramatically since the Sept. 11, 2001, attacks, and they want the government to continue to pick up war-risk insurance for the carriers.

After the Sept. 11 attacks, airlines received $5 billion in government help and were offered up to $10 billion in loan guarantees.

"We've said very specifically to the Congress that look, what we are looking for is not a bailout, but an economic cushion for the effect of specifically the hostilities in Iraq," said May.

Delta Air Lines CEO Leo Mullin, who has been in the forefront of industry efforts to lobby for government help, told the Wings Club in New York on Wednesday that airlines certainly are to blame for a share of their financial woes. But he added that the government bears some of the responsibility.

"In some quarters, airlines are accused of always having their hand out for government largess," he said. "It's a compelling image, but it is 180 degrees wrong. In truth, it's the government that has its hand out to airlines. For more than three decades, Washington has imposed on airlines and travelers a mountain of taxes and fees that have contributed significantly to the industry's looming collapse."

Key lawmakers on Capitol Hill held a meeting Wednesday to try to come up with a proposal to help the airlines, but some in the administration are against the move. It's seems likely that whatever aid the airlines can get will be nowhere near the amount they would like.

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