United, American Announce Layoffs

N E W   Y O R K, Sept. 20, 2001 -- The cutbacks just keep on coming, while the government aid package for the airlines seems to keep getting smaller.

American Airlines and United Airlines, the two largest carriers in the United States, announced Wednesday that they will each lay off 20,000 employees — a direct response to last week's terror attacks, in which four planes were hijacked and crashed in New York, Washington and Pennsylvania. Two of the hijacked planes were United flights; the other two were American.

That brings the industrywide number of announced layoffs to about 70,000 since Sept. 12, the day after the attacks. Continental Airlines and US Airways are among the carriers that have also have announced layoffs.

The ripple effect is also reaching overseas. British Airways, Europe's largest airline, said today that it was laying off 12.5 percent of its work force, grounding 20 aircraft and reducing flights by 10 percent in the wake of attacks on the United States.

The airline, which relies heavily on transatlantic business, said it would cut a further 5,200 jobs, in addition to 1,800 already announced this month. British Airways's stock has fallen 42 percent since the eve of the September 11 attacks.

Airline Aid Package Could Be $5 Billion

Meanwhile, in ongoing negotiations late Wednesday evening, the Bush administration has reduced its bailout offer for the airline industry to $5 billion in immediate cash, rather than a $17.5 billion cash-and-loan package.

White House negotiators and congressional leaders met on Capitol Hill Wednesday night to discuss the terms of the package, but the Bush administration has withdrawn its support for $12.5 billion in loan guarantees sought by industry leaders.

The White House will also offer $3 billion in emergency funds already approved by Congress to pay for security improvements.

House leaders had originally suggested a $15 billion package, while airline executives have publicly called for $24 billion in aid. The Bush administration and the House appeared close to agreement on the $17.5 billion figure Wednesday night, but now seem likely to back the smaller measure.

The House held hearings on the matter Wednesday, and Senate hearings are set for today.

Losses and Remedies

Transportation Secretary Norman Mineta, following a Tuesday meeting with airline CEOs, said the industry may be losing as much as $300 million a day.

Delta Air Lines head Leo Mullin has said financial aid is necessary to ensure the industry does not become the first major economic casualty of the terror attacks. Revenue was lost entirely in three of the four days last week following the Sept. 11 terrorists attacks, explained Mullins, and in coming days revenue would be no more than 40 percent to 50 percent of normal.

"The tragedy of last week certainly affected America in every way," he added. "And it is, from the standpoint of the airline industry, perhaps the biggest challenge in our history."

Boeing Announces 30,000 Cuts

The airline crisis also seems likely to take a heavy toll on the manufacturing side of the airplane business. The Boeing Co. announced Tuesday that it will lay off 20 percent of its workforce — up to 30,000 employees.

In a statement released Tuesday night, Chicago-based Boeing said the layoffs were in response to last week's terrorist attacks as well as the anticipated drop in business for the rest of the year and in 2002. The airplane manufacturer said it will lay off 20,000 to 30,000 people by the end of 2002.

"We profoundly regret that these actions will impact the lives of so many of our highly valued employees," said Alan Mulally, president and CEO of Boeing Commercial Airplanes. "However, it is critical that we take these necessary steps now to size the commercial airplanes business to support the difficult and uncertain environment faced by our airline customers."

Boeing said its deliveries, which were anticipated to reach 538 by the end of this year, could now be as low as 500. Its deliveries for 2002, initially expected to exceed 500 in 2002, may reach the low 400s.

Setbacks Follow World Trade Disaster

The terror attacks and their aftermath have resulted in a colossal, unprecedented setback for the entire airline industry.

Commercial flights have resumed since four airliners were simultaneously hijacked and crashed on Sept. 11, with two of the planes destroying the World Trade Center in New York and one hitting national defense headquarters at the Pentagon in Arlington, Va. The fourth crashed in rural Pennsylvania.

In addition to the major airlines, smaller carriers have also announced cutbacks, with America West, American Trans Air, Frontier Airlines and Midwest Express layying off employees. And regional carrier Midway Airlines folded last week.

Reduced demand, more expensive security measures and possible liability lawsuits related to Tuesday's hijackings could all serve to greatly increase the airlines' financial woes.

At least 40 percent of the airlines' normal operating costs continued even with all their planes grounded, including wages for crews and workers, and just about every normal expense other than fuel and landing fees.

Then there are the potentially expensive settlements that United and American may have to pay to families of the victims aboard the hijacked planes.

ABCNEWS' Linda Douglass contributed to this report.