Ailing airlines look for financial aid

ATLANTA, Georgia (CNN) -- When he announced cutbacks Saturday, Continental Airlines CEO Gordon Bethune said terrorist attacks struck not only at the hearts of the financial district and government, but at the heart of the airlines.

And he urged the federal government to help keep the aviation industry functioning.

"You're not going to live without this vital part," he said. "We are not some adjunct, some machine, some computer. We're a pump just like the heart's a pump, and we need to facilitate and keep our economy going."

Nearly a week after the disasters, airlines are bleeding cash, about $300 million a day by some estimates, and looking for ways to cut costs.

United States Transportation Secretary Norman Mineta plans to meet this week with heads of the nation's major airlines to address problems related to the attacks. Other senior administration officials are expected to participate. Congressional action also is possible.

'Major problems'

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Along with Continental, which plans to reduce its long-term flight schedule by about 20 percent, furlough about 12,000 employees and end service to 10 cities, U.S. Airways said it would cut capacity 23 percent and lay off 11,000.

Northwest and American also have announced schedule cutbacks and are expected to cut jobs, and United and Delta plan cutbacks as well.

International airlines aren't immune either. Virgin Atlantic announced plans Monday to cut 1,200 jobs and a fifth of its transatlantic flights.

"You throw in a recession, that's bad enough," said Richard Gritta, professor of finance and transportation at the University of Portland's Pamplin School of Business in Oregon, "but then you throw in last Tuesday, and you're looking at major, major problems."

Wall Street underscored those problems Monday, as aviation stocks took some of the hardest hits after trading reopened.

Analysts say losses from last week's grounding of flights will only be compounded by public fears of air travel. And there's no telling how long it will take travelers to return.

"We're into uncharted waters here. I don't think any of us can really predict exactly when we'll come back," said Leo Mullin, president and CEO of Delta Air Lines. "We are expected a lengthy amount of time before we get back to levels that would have prevailed otherwise."

Eyes on Washington

A measure that would have provided $2.5 billion in cash assistance to the airline industry and another $12.5 billion in loan guarantees was defeated in the House on Saturday amid concerns that airlines would be getting special treatment. But House Minority leader Dick Gephardt, D-Missouri, has promised to revisit the issue.

Robert Crandall, former CEO of American Airlines, told CNN that government loan guarantees for the airlines would be in the national interest.

"After all, we have to have an airline industry," he said. "It is the only intercity transportation system in the United States, that needs to be vigorous and strong. If it needs some help to get through this rough patch, I think the Congress and people ought to support it."

Sen. John McCain, R-Arizona, Monday said the airlines are in "dire trouble" and called on Congress to help.

"We must act immediately to support this crucial sector of our national transportation infrastructure, which is so vital to our commerce," McCain, the top Republican on the Senate Commerce Committee, said in a written statement.

"If we don't act soon, I'm afraid that it will be even more difficult to resuscitate this key industry in the future."

Consumers could suffer

Some have concerns about bailing out the airlines, noting that the insurance industry and others also are suffering.

And Sen. Fritz Hollings, D-South Carolina, wants the airline industry to make other changes before the government lends a hand.

"I would be willing to consider compensation if they give up monopolistic control of the nation's hub airports," he said in a statement released Sunday.

"I recall that in testimony before the Commerce Committee, the airlines told us they were going broke long before these attacks occurred, while at the same time giving their executives $120 million in salaries and bonuses."

Whatever Congress does, ongoing industry woes could result in more airline mergers, and that could be bad news for fliers, Gritta said,

"I don't want to see it, but it is one solution I have heard some people mention -- that there may have to be consolidation. Airlines may argue that, but in the long run who's going to pay the tab? It will be the consumers," he said.