European airlines in crisis
October 3, 2001 Posted: 1529 GMT
LONDON (CNN) -- News that Swissair has become the first European airline to file for bankruptcy protection has highlighted the crisis faced by the continent's major airlines following the terrorist attacks in the U.S.
Carriers across Europe are struggling for survival as passengers shun air travel and investors rush to pull their cash from companies being hit by falling trade and revenues.
The attacks on the World Trade Center and the Pentagon could not have come at a worse time for the airlines, as they were already fighting to counter the effects of the global economic downturn.
Trevor Ward, of TRI Hospitatlity Consulting told CNN: "We have absolutely no idea when things are going to go back to normal. There is no point making any forecasts at the moment. The world is still very much upside down."
Swissair is desperately searching for more cash to return its jets to the air while Belgian carrier Sabena, which is 49.5 percent owned by Swissair, is also fighting to avoid collapse.
Sabena, like Swissair, has applied under bankruptcy protection rules to be shielded from creditors and the Belgian government is rushing to supply it with 
125 million ($115 million) -- a month's funds -- to avoid it going the same route as Swissair.
"We expect... airlines to go deep into loss, and there is a possibility that further European airlines will follow Swissair in having to seek protection from creditors," J P Morgan analysts said in a research report.
But the European Commission has reaffirmed it is reluctant to see any form of state aid being used to bail-out cash-strapped airlines on the continent and has said it will be discussing with Belgium its use of government funds.
BA moves to counter downturn
British Airways, Europe's biggest airline, said two weeks ago it plans to slash 5,200 jobs in response to the suicide hijackings in the U.S.
BA, which had previously announced 1,800 job losses, said it would also ground 20 aircraft and reduce scheduled flights by 10 percent.
KLM Royal Dutch Airlines has already cut capacity by five percent but said on Wednesday that it would have to implement further schedule reductions, Reuters reported.
Italian national airline Alitalia is shedding 2,500 jobs, selling at least 12 aircraft including MD-80s, MD-11s and Boeing 747s and leasing other planes while also freezing new plane orders.
German carrier Deutsche Lufthansa is postponing orders for up to 15 Airbus A380 aircraft and four Boeing (BA: Research, Estimates) 747-400 wide-bodied jets. Boeing, the world's biggest commercial jet maker, is cutting up to 30,000 jobs.
UK airline Virgin is shedding 20 percent of its capacity and slashing 1,200 jobs. Its boss, Richard Branson, told CNN he would be interested in receiving favourable credit from banks.
Conversely, the crisis facing Europe's big carriers has proved a boon to some of the continent's low-budget airlines, with EasyJet applying to move in on the London Heathrow to Belfast UK domestic route that high-cost British Airways has decided to ditch following the U.S. attacks.
Airline crisis hits travel industry
But the crisis facing airlines is rippling out through the rest of the travel industry, with hotels and car rental companies reporting sharp falls in custom and airport operators feeling the financial heat of having to increase security as passenger numbers fall.
And Geneva-based analysts for airports body Airports Council International say a fall in world air cargo traffic, a mainstay of global trade, is damaging the world economy.
ACI said the turmoil facing airlines after the U.S. disaster coupled with the global economic slowdown could slash the growth in world trade to less than two percent this year.
Air cargo accounted for 40 percent of the value of world trade, nearly $6.2 trillion in 2000, Reuters reported.
ACI official Maria Hinoyan told the news agency: "All the signs are bad. We are seeing the cargo volume go down faster and faster after a sharp drop already this year."
Meanwhile, in the U.S., airline executives have told Congress they expect more than 100,000 people to be laid off within the industry.
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