After Sept. 11, Airline Industry Grappling With Flying the Empty Skies by Mark Hilpert The last thing international airline carriers needed amid a global economic downturn since mid-2000 was the Sept. 11 attacks. Already, fewer business passengers were jet setting because of tighter corporate budgets, combined with a growing reliance on pressing Palm Pilots to do the sort of global deal-making that used to require actual palms pressing. And more leisure passengers, feeling the pain of a diving Dow Jones and lighter wallets, were now looking to destinations within striking distance of the minivan instead of opening the World Atlas, picking somewhere fun, and calling the travel agent. After the attacks, flights across the United States were halted for days as the government and air carriers tried to convince passengers that flying wasnít hazardous to their health. Just going to the airport, now the scene of camouflaged soldiers, bomb-sniffing dogs and long lines at security checkpoints, turned additional customers away. As a re sult, the airline industry has cut flights, lost planeloads of money, slashed carrying capacity, and shed more than 250,000 jobs since the attacks. The changes had major implications for those who frequently run out of space for stamps on their passports. In addition to worrying that the world was much more dangerous than before, travelers had to deal with simple realities like the fact that getting that convenient flight to Paris was now even tougher after the airline slashed service. Delta alone discontinued flights from John F. Kennedy International Airport in New York to Tokyo, Tel Aviv, Dublin, Cairo, Dubai and Zurich. Like any international development, the bum economy and catastrophic attacks have affected different international carriers differently, with some feeling the brunt worse than others. One airline, Australiaís famous Qantas Airways, is both reeling and recovering. A primarily international carrier (78 percent of Qantasí 2000 profits were generated by international operations), it cut international flight capacity since the attacks by approximately 10 percent, reduced staff, and moved a significant number of retained workers from international to domestic operations. ìThe events of Sept. 11 have affected services far beyond the United States,î said Qantas CEO Geoff Dixon, who noted a significant downturn in travel to and from Europe, Southeast Asia and Japan, with bookings from Japan down 25 percent and down 23 percent from the United Kingdom. Although few passengers canceled flights already booked for fall 2001, Qantas is currently suffering an overall drop in forward bookings (people booking flights in the next six months) by about 10 percent to 20 percent. In response, Qantas cut non-stop U.S. flights to Australia and New Zealand, from 35 to 28 a week, and even suspended service from New York. But it is still posting a profit (albeit a much smaller one) and airplanes with the Qantas kangaroo logo will reappear at John F. Kennedy airport in late February due to slowly increasing demand. Dixon promised to resume other withdrawn services as soon as possible but had no illusions that the skies arenít cloudy. ìWhile the terrorist attacks and subsequent events in Afghanistan [have] not affected Qantas as severely as many other airlines, the downturn was still significant,î he acknowledged, adding that the carrier is watching all its international routes carefully. ìWe also have the capacity to retire aircraft from our international fleet quickly. This option will be taken if there is any further deterioration in international travel.î But Qantas is moving to win back riders and prepare for a market recovery: It touts a $100 million project to improve security and just announced a 10-year alliance with American Airlines, the worldís largest flyer. The deal will include Qantas commencing non-stop services between Dallas and Auckland in late 2002. A carrier facing unique challenges is Israelís El Al. The company, which makes 16 flights per week from New York to Israel (but does not fly from Washington, D.C.) was hit hard by the recession and attacks but appears to be hanging tough. Even though business is off sharply, El Al has retained its schedule of flights, possibly benefiting from a recent drop in U.S. carriers that fly to Israel. ìThereís been about a 25 percent to 30 percent falloff in passengers since 2000,î said El Al spokeswoman Sheryl Stein, who added that the carrier has cut prices on flights and various package deals by 30 percent to 40 percent to draw back customers. The breakdown of the Middle East peace process in fall 2000 was, no doubt, a major cause of the slump. But Stein pointed to El Alís advantage in having already met new FAA security guidelines instituted in the wake of the Sept. 11 attacks as the main reason it was the first carrier to depart New York following a multi-day national shutdown of all flights across the United States. El Al, widely known for having the best security measures of any major carrier in the world, quite possibly has suffered less of a drop in business than it could have because of the longtime faith passengers have in the safety of flying El Al. ìWhatís amazing [in the face of the economic downturn] is that weíre running pretty full flights,î Stein said. With ski season here, many jet setters will be pleased to hear that one airline has actually increased its flights from Washington, D.C.óAustrian Airlines has bumped up its service from Dulles Airport to Vienna from six days a week to seven. ìWeíre very pleased with the demand from Washington to Vienna,î said Austrian Airlines Group spokesman Guenter J. Hude, the companyís general manager for the Americas. Although the carrier suspended flights from Toronto, Miami and Chicago following the attacks, its planes may put Windy City breezes back under its wings as soon as next spring if the economy continues to improve, and Hude said heís ìoptimisticî about restoring the other routes. But like his colleagues with other airlines, Hude is forthright about the current challenges. ìThe American economy is not in brilliant shape, Europe is in even worse shape,î he said, noting that Austriaís economy is growing a meager 1 percent. Although the attacks drove Austrian Airlinesís ridership down by about 30 percent to 40 percent, Hude said that figure is now only down about 10 percent from a year ago. One factor could be that the carrier immediately put crack Austrian police on its planes as sky marshals immediately after the attacks. Hude said approximately two-thirds of the companyís slump in business can be traced to conditions preceding the attacks. He emphasized that much of the airline industryís current problems have nothing to do with the attacks, which he believes are being used by many as an excuse for poor management and bad business practices, such as offering fire-sale deals to Europe. ìThe industry had too much overcapacity, too many ridiculous offers,î he said. Hude noted that the last time a similar worldwide situation occurred during the Gulf War and recession of the early 1990s when his business dropped about 25 percent to 30 percent but only for a period of about nine months. ìWhat we notice now is many people are saying the recession may not last as long as expected originally,î Hude said, emphasizing the importance of this to his company. ìWe are so dependent on the world economy.î Hude is waiting around, though. After pausing after the attacks to avoid being ìtasteless,î he watched the competition and started offering special deals. ìFlying empty aircraft is not fun, so we started some special packages, because we saw that if you have a good offer, people will buy even if there is a fear of flying,î he said. Hude has also sought to improve sales through a niche practice of giving the travel agents who provide 90 percent of his North American business better commission deals. Like most U.S. airlines, Delta suffered a serious financial hit from Sept. 11. The Atlanta-based company has lost approximately $8 million per day since the attacks, which is actually lower than some other U.S. carriers. The setback resulted in major staff cuts and reduced carrying capacity (usually based on available seat miles) by 15 percent. Company leaders are obviously struggling to turn a difficult situation around. ìPrior to Sept. 11, any discussion that questioned our airlineís capacity for financial survival would have been unthinkable,î said Delta chairman and CEO Leo F. Mullin in a statement just after the attacks. ìBut on that tragic day, war was declared on the United States of America using aviation as the instrument of destruction. ìAs a result, the operational and financial outlook for airlines has changed precipitously and drastic measures are required if we are to avoid becoming the first economic casualty of the war. We must take steps unprecedented in our companyís history if we are to ensure Deltaís safe passage until a more stable economic environment returns to the aviation industry.î Those steps have included canceling major routes from New York, and although some are still serviced from Atlanta, Delta has scrapped previously planned routes from there to Jamaica and Mexico and suspended additional flights offered only during the winter season or weekends. ìAs demand comes back, we will look to reinstate service to these cities where that can be done profitably,î Mullin said. In fact, Delta announced in early November that it was reinstating non-stop service to Brussels from New York. Deltaís SkyTeam, composed of Delta and foreign partners AeroMÈxico, Air France, Alitalia, CSA Czech Airlines and Korean Air, will service other suspended routes. The alliance is also pushing hard to overcome business setbacks through such methods as persuading the U.S. government to grant it anti-trust immunity, which Delta says will ultimately enable SkyTeam to expand its U.S.-European network and provide more connections. It expects approval before the end of the year. Delta isnít the only airline lobbying government in the face of global challenges. In an interesting parallel to the debate in the United States over the wisdom of subsidizing struggling U.S. carriers in the wake of the Sept. 11 attacks, Qantas is pushing hard on its own behalf in an Australian debate over whether to bail out a competitor, Ansett, and allow the expansion of Virgin Airlines operations in Australia. Mark Hilpert is a freelance writer in Washington, D.C.