Airline stocks plunge; government considers bailing out industry

Liz Kohman

Airplanes are flying again, but airline stocks are plummeting after the market reopened Monday.

Northwest’s stock dropped 36.7 percent, closing at $12.42 a share.

Other airlines’ stocks also sank in the wake of Tuesday’s attacks. American Airlines stock fell 39 percent to $18 on the New York Stock Exchange.

The falling stock prices come in addition to millions of dollars of lost revenue. Northwest lost an estimated $23 million each of the two days flights were grounded, said a Northwest official.

“It’s really staggering,” said Doug Killian, Northwest spokesman.

Northwest, which controls 80 percent of traffic at Minneapolis-St. Paul International Airport, reduced its flight schedule by 20 percent. Killian said the airline is reviewing its needs and will announce possible layoffs in a couple of days.

University senior Mark Gore has worked at Northwest as an aircraft caterer for three years. He said he’s not nervous about getting laid off, but other employees seem to be worried.

Before this week, Northwest made more than $4.2 million in cuts due to high overhead expenses and lower passenger counts.

Killian added that Northwest and all other U.S. carriers received an advisory list from the FBI of 52 people with Middle Eastern names. Passenger names are checked against the FBI list, but Killian declined to comment on what would happen if one of the listed individuals is discovered.

Northwest CEO Richard Anderson and other airline executives are in Washington today asking for federal aid to help bail out the ailing airline industry.

Robert Kudrle, a University professor studying industrial organization and public policy’s relationship to business, said the airlines have an excellent chance of receiving aid from the government.

He said the issue is whether the aid will be in the form of guaranteed loans or federal grants.

Kudrle said airlines will likely receive guaranteed loans instead of grants because the industry is composed of private companies. But there is a chance taxpayers will lose if airlines are unable to pay the loans back.

There is a precedent for giving federal aid to private companies, said Kudrle. The Chrysler Corporation received $1.5 billion of federal guaranteed loans in 1979.

“Whenever there’s danger an important firm will go out of business,” Kudrle said, “(federal aid) is always an option.”

The airlines would eventually recover, but not very soon, Kudrle said.

Patrick Hogan, a Metropolitan Airports Commission spokesman, said extra security measures and fewer passengers have slowed down airport revenues. He said the airport has lost revenues in parking and retail sales, but there are no conclusive figures.

Due to revenue losses, the commission has also stopped all non-essential construction and could delay the opening of a new runway.

The airlines have also increased security measures in compliance with Federal Aviation Administration regulations.

The new regulations allow only ticketed passengers to pass beyond security checkpoints before the gates. They also call for more thorough examination of checked luggage and increased searches of carry-on items and passengers.

The regulations also ban any cars from parking within 300 feet of a terminal.

– The Associated Press
contributed to this report.