Airline ticket prices were expected to rise and carriers to slash jobs and flights as war erupted in Iraq today, shaking a sector already struggling amid rising international tensions.
Airlines have lost $30 billion in the last two years and have warned that any war would again hit earnings in 2003, as demand for tickets is expected to fall by as much as 20%.
To help airlines cope with a surge in jet fuel prices, IATA, the Geneva-based trade association, is set to boost international ticket prices by 3%, industry sources said. IATA member airlines agreed this week to a fare rise expected to take effect on April 15 and plan to make an official announcement, the sources said.
Continental Airlines, the No 5 US carrier, announced 1,200 job cuts yesterday and suggested more could come if war is prolonged. 'We need $500m in annual cost savings and revenue generation to permit us to be a survivor during the worst financial crisis in aviation history,' said Chief Executive Gordon Bethune in a statement.
Analysts said other airlines would follow suit. Top US airlines cut flights by an average 15% the September 11 attacks in the US.
European and Asian carriers are seen better prepared for the war than their hard-hit peers in the US, where UAL Corp's United Airlines and US Airways Group are already in bankruptcy.
Still, credit ratings agency Standard & Poor's has put the largest airlines in Europe and Asia, British Airways and Japan Airlines System Corp, together with several US peers, on its CreditWatch list with negative implications.
Insurance and security costs also jumped after the September 11 attacks which forced airlines to incur almost $7 billion in additional costs.
The industry is in worse shape than at the time of the last Gulf war in 1991, with margins squeezed further as low-fare carriers grabbing market share make it harder for airlines to pass on higher costs through ticket prices.
