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 When J.P. Morgan Chase & Co. airline analyst Jamie Baker warned "there will be blood" in a research report last month, he complained airlines were not doing enough to cope with the realities of high oil prices. The U.S. industry could lose more than $7 billion this year, according to Baker, but are not cutting nearly enough to stay ahead of rising costs and avoid potential liquidity crises.
"If it sounds like we're panicking, it's because few managements appear to be," the analyst wrote. But it appears the warning siren has finally reached the corner office. American Airlines Inc. just days after Baker's report was released said it would cut 12% of its schedule and ground at least 75 planes. US Airways Group Inc. management more recently has warned employees they would consider all options. And now, rumors are swirling that other airlines could be preparing even more draconian cuts. UAL Corp., parent of United Airlines, is according to rumors close to announcing it will eliminate upwards of one-quarter of its employees, ground 100 airplanes and end its Ted "airline within an airline" brand. Such deep cuts would affirm fears in the industry that employee groups, whose adamant opposition to a proposed United merger with US Airways helped derail a potential deal, could pay a heavy price as the airline charts its course as an independent. Privately held Spirit Airlines Inc., meanwhile, may soon lay off 448, or 60%, of its flight attendants and 242 pilots (45%) as it cuts back due to gas prices, according to a Miami Herald report. While exact numbers remain to be seen, there is little doubt the U.S. aviation industry, which could spend $17 billion more on fuel this year than it did in 2007, is shrinking. And that means airline employees, who endured a string of bankruptcies, lost pensions and restructurings since September 2001, are in for another tough year absent some sort of remarkable, and unlikely, dramatic pullback in the price of crude. - Lou Whiteman See Dealscape post with Baker's comments See TheDeal.com story on cuts by American Airlines See TheDeal.com story on potential cuts after the United/US Airways deal fell through See Miami Herald story on Spirit cuts Categories Deal Video
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