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April 8, 2003 – A Slow Recovery

The U.S. airline industry slump will probably linger until at least 2005, said a majority of executives attending the annual New York Airfinance Journal conference, with more than 80 percent predicting another major airline bankruptcy in 2003. American, Monday, announced it will fly about 2 percent fewer domestic flights than planned in May. International flying will be about 13 percent lower. United pared its schedule by 8 percent. US Airways nipped 4 percent of its flying. Continental announced temporary reductions last month on overseas routes because of the war, then followed up with a 2 percent cut in summer capacity as well. Moody’s analysts say they see no recovery until several factors are mitigated – the fear of flying during wartime; the slow economy; and the dramatic cutback in airline capacity. They predict airlines’ liquidity will recover in the 2004 to 2005 time frame, earnings and cash flow in 2005 and the capital structures will return to health in 2008 to 2010.

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