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Wed, Mar 12, 2003

War Could Cut Demand for Air Travel

ATA Says 70,000 More Could Go Home

The Air Transport Association says that, if the US and Iraq go to war, demand for airlines' services may drop so far that as many as 70,000 people could get the axe.

The ATA says that such a war could lower the top line to major airlines by as much as $4 billion per quarter, as fuel costs and taxes eat up the industry from the middle and bottom of the income statement.

Without naming specific scenarios, the ATA noted that US Airways' emergence from Chapter 11 might not happen, and that United's news could get even worse; and that possibly American could join them in Chapter 11, if for no other reason than to stay competitive. [Chapter 11 firms don't have to pay on their 'prepetition debt,' what they owed before they filed for court protection, until after they emerge -- and then, it's usually a fraction of the actual amount --ed.]

The ATA further warned that the only way to spur air-travel demand might be to further cut prices. A tax cut would go a long way toward helping the industry stay afloat.

FMI: www.air-transport.org

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