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ATTACK ON THE U.S.

Saturday, Feb. 4, 2006

The Airlines - Troubled industry faces new questions

By DAVE EBNER, The Globe and Mail
Wednesday, September 12, 2001

Tuesday's U.S. terrorist attacks - arguably the biggest disaster in global aviation history - leaves an already beleaguered industry facing serious new questions about its security and reliability, industry observers say. "Air travel will certainly be disrupted for several days and possibly for months," reported Lombard Street Research Ltd., a London-based firm. "A severe dampening effect on business travel and tourism is also inevitable." AMR Corp.'s American Airlines and UAL Corp.'s United Airlines both lost two planes to hijackers. American Flight 11, flying from Boston to Los Angeles, had 92 people aboard and crashed into the World Trade Center. United Flight 175, also flying from Boston to L.A., had 65 people aboard and crashed into the World Trade Center's second tower. Both towers collapsed soon after. A third, smaller tower collapsed late Tuesday afternoon. American Flight 77, flying from Dulles Airport outside Washington, D.C., to Los Angeles, had 64 people aboard and crashed into the Pentagon. United Flight 93, flying from Newark, N.J., to San Francisco, had 45 people aboard and crashed near Shanksville, Pa., about 130 kilometres southeast of Pittsburgh. Late Tuesday, United said it would provide an "initial sum" of $25,000

(U.S.) to families of victims of the crashes of its two planes. The airline said it had identified all passengers and crew and was notifying next of kin. The disaster couldn't have come at a worse time for an industry already hobbled on a number of fronts. A slump in business travel, high fuel costs and rising labour costs already led analysts to estimate $2-billion to $3-billion in total losses for U.S. airlines this year. Given the severity of Tuesday's attacks, experts speculated losses could surpass the record shortfall of 1992, when an estimated $4-billion was lost. "This could go down as the single worst year," Kevin Mitchell, chairman of the Business Travel Coalition, a U.S. industry group, told Reuters News Agency. Without a doubt, passengers will shy away from flying, said Robert Harwood, an analyst who follows Air Canada stock for Lafferty Harwood & Partners in Montreal. "It'll certainly have an impact on traffic," Mr. Harwood said. "If an airplane crashes, everybody worries for a few minutes after the crash: `Will I take another flight?' Then the day passes and they book a flight. But this time it's definitely more serious. And you can't tell if these fellows will strike again. What baffles me is how [the terrorists] kept this quiet." Fear and uncertainty dominated the industry Tuesday. The U.S. Federal Aviation Administration grounded all planes in the country, for the first time ever, an edict in effect until at least noon Wednesday. Numerous airports in the United States and Canada closed and airlines on both sides of the border shut down operations until further notice. At least one travel agency, American Express Canada Inc. in Toronto, also closed its doors, though it said it would reopen Wednesday. Mr. Harwood said it's difficult to forecast how long Tuesday's attacks will haunt the industry. "You can't put a time frame on it," Mr. Harwood said. "Because planes are the only way we can get around quickly, I don't think it's going to destroy the industry in the long term. It's the in-between part that you have to worry about." Mr. Harwood said uncertainty surrounding the attacks will extend the malaise, pushing security concerns to the fore. Essentially, airlines face a series of "expensive propositions," he said, including less flights, due to lower demand, while fixed costs remain steady. Meanwhile, investors dumped airline shares Tuesday. In Toronto, trading lasted about an hour. Air Canada stock fell 40 cents

(Canadian) or 6.3 per cent to close at $6, a 52-week low. WestJet Airlines Ltd., Transat A.T. Inc. and Canada 3000 Inc. also fell. U.S. airline stocks did not trade because all American stock exchanges were closed. In Europe, investors worried that airline profits would fall further as travellers stay home, afraid of more terrorist attacks. The Bloomberg Europe airlines index plunged as much as 17 per cent Tuesday, ending the day at a 52-week low of 48.35 points, down 7.34 points or 13.2 per cent. All eight stocks in the index fell, led by its two largest issues. Deutsche Lufthansa AG, which lost 2.31 euros or 15.1 per cent, closed at a 52-week low of 13 euros. British Airways PLC, Europe's largest airline, lost 56 pence - 21.2 per cent - to finish at 208 pence, also a 52-week low. "Shares could be down for the next few months and operating profit will be hit hard," Kimberly Stewart, an analyst at BNP Paribas, told Bloomberg News. "Airlines are already being hit by the economic slowdown." Ms. Stewart did not predict how far passenger traffic could fall but recalled the Persian Gulf war in 1991, when traffic fell 6 per cent.






 PHOTOS

Life Goes On
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SPECIAL
Voices From After the Fall, The Facts Behind the Fear, and the preview of a new Discovery documentary filmed at Ground Zero.


VIDEO






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  • Six-month Memorial for Sept. 11 - U.S. President George Bush speaks from the White House. "The terrorists will remember Sept. 11 as the day their reckoning began," he said.

  • In Canada - Relatives of Canadian victims of the World Trade Centre attacks wonder why there's no six-month memorial here at home.

    CTVNEWS.com video reports



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