MD88Captain
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What Does A US/Iraqi War Mean To The Airlines?

Fri Aug 30, 2002 5:48 am

I read pronouncements daily of a coming US attack on Iraq. Considering that the last Gulf War threw the airline industry into turmoil and recession, I wonder if a new Gulf War will be the death nell for most airlines. Today few airlines are profitable or even breaking even since 9-11 and a recession that started before 9-11. What's going to happen to traffic when/if the bombs start dropping?

Any scenarios out there? Please keep the anit-war/pro-war sentiments to yourself, since thats not the question. I'm just wondering how the airlines are going to whether another Gulf War considering their weakened state. Crystal balls anyone? Bueller? Bueller?
 
Guest

RE: What Does A US/Iraqi War Mean To The Airlines?

Fri Aug 30, 2002 5:55 am

Another major slump on global traffic.

They airline traffic dropped 15% to 20% during and after the Gulf War in 1991.
 
N79969
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RE: What Does A US/Iraqi War Mean To The Airlines?

Fri Aug 30, 2002 6:08 am

I think it would be like a wrecking ball through much of the industry. It would definitely throw the weakest carriers over the edge and put a few more on precipice. My guess is that international travel from the U.S. and a lot of Europe would be nearly wiped out. I think domestic US travel would take a big beating as people will be worried about retaliation.

I think east and southeast asia will do fine. SE Asia might actually benefit as Japanese and other well-heeled Asian travelers avoid the US and Europe.
 
bkkair
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RE: What Does A US/Iraqi War Mean To The Airlines?

Fri Aug 30, 2002 6:15 am

I was thinking the same thing. I remember flying on a Delta flight in 1991 a day after the Gulf War started and the plane was almost empty. People were terrified to fly.

After last September, if Bush attacks Iraq, airline traffic ( on US airlines) will drop lower than it did last September and October.

I can see many major US airlines not only declare bankruptcy but shut down altogether.

Better cash out your frequent flyer points on US airlines now!
 
SInGAPORE_AIR
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RE: What Does A US/Iraqi War Mean To The Airlines?

Fri Aug 30, 2002 6:32 am

It would be chaos for airlines and many will go out of business.

Traffic will fall dramatically, leading to the collapse of small airlines in the world / (some consolidation in some geographical regions), the collapse of major US airlines and traditionally profit-robust airlines like Singapore Airlines Group would most probably be hard pushed to post a profit.

Fuel would also go up. No war with Iraq means that oil will not go above $30.00 a barrel according to analysts. It's at $27.77 per barrel. Singapore Airlines reported that a 1% change in the oil price wold push costs up by S$19 000 000 / US$10 856 600.

Let's say it goes to $42.50. An uneducated / slightly educated guess. By repeatedly multiplying $27.77 by 1.01, it means that $42.50 is 42% higher than $27.77.

S$19 million / US$10.8566 million x 42 = S$798 000 000 / US$455 977 200.

Voilà. Though I support the war on Iraq. I hope SIA can cope if such an event arises... which it probably will. Oh dear  Sad
Anyone can fly, only the best Soar.
 
737doctor
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RE: What Does A US/Iraqi War Mean To The Airlines?

Fri Aug 30, 2002 6:45 am

I agree with Singapore_Air; fuel prices would definitely go up. The period during and after the Gulf War was a horrendous time for the aviation industry and it was also the last time that my airline (SWA) didn't post a profit during a quarter (although they continued to post yearly profits). The company implemented numerous cost-cutting measures during that time in order to cope and even the employees got involved by voluntarily pledging a portion of their pay back to the company to offset fuel costs.

I also imagine that load factors would dip due to the passengers' fear of attacks or sabotage. With so many airlines reeling after 9/11, one would have to wonder if an attack right now would be an intelligent move economically, nevermind the waning global support for such an action.
Patrick Bateman is my hero.
 
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STT757
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RE: What Does A US/Iraqi War Mean To The Airlines?

Fri Aug 30, 2002 6:51 am

I think once it's over though confidence will be boosted tremendously due to a heightened feeling of security knowing that terrorists could no longer have Iraq as a safe haven or have access to their weapons technology.
Eastern Air lines flt # 701, EWR-MCO Boeing 757
 
MD88Captain
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RE: What Does A US/Iraqi War Mean To The Airlines?

Fri Aug 30, 2002 6:58 am

That may be true STT757, but will they have any airlines to fly afterward? Could the war be completed in 2 months? 6 months? And I do not discount Iraq as a true threat, but the airlines would be caught in a storm that might sink most of them and cripple the rest. Fuel would skyrocket and traffic dwindle.
 
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STT757
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RE: What Does A US/Iraqi War Mean To The Airlines?

Fri Aug 30, 2002 7:08 am

When the Iraqi army was 1 Million strong it took a couple weeks of air bombardment and 100 hours of ground fighting to defeat.

None of the airlines are going to be making money anytime soon, might as well provide the foundation for a safe and prosperous future rather than live in fear and uncertainty for ever.
Eastern Air lines flt # 701, EWR-MCO Boeing 757
 
backfire
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RE: What Does A US/Iraqi War Mean To The Airlines?

Fri Aug 30, 2002 7:21 am

It'll probably put a downer on Iraqi Airways' plans to join Star Alliance. Big grin
 
deltaflyertoo
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RE: What Does A US/Iraqi War Mean To The Airlines?

Fri Aug 30, 2002 7:26 am

I think some of you are thinking too much of a doomesday scenario. Other than higher oil costs, which will hurt everyone and indeed push 1 or 2 majors over the edge, I do not forsee a downturn in traffic any worse than what we are seeing.

I think traffic levels will remain the same. I think Americans have grown used to the higher level of threat we are on and are flying in vast numbers. If you look at average load factors, all the airlines, are in the upper 70%. Most of that 70% just happens to be VERY low yield. W/ an Iraq invasion, I see only a small drop. Nothing like the weeks following 9/11.

 
MD88Captain
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RE: What Does A US/Iraqi War Mean To The Airlines?

Fri Aug 30, 2002 7:39 am

The last time took longer than a couple of weeks if you count the build up. Remember Desert Shield? The press will be all over any military movement toward Iraq and the media coverage alone will skyrocket oil prices, deepen recession, and torpedo air travel.

At the end of the Regan build up and the military was in great shape. Bush Sr. built an international consensus and had either direct military assets or monetary support from the world. Today the US would have to do it alone. The US military is nothing close to the size it was in 90-91. It is no where near as ready for another war. There will be no staging out of Saudi Arabia this time. No help from Jordan, et al. There won't even be a consensus in the US.

I don't believe anyone believes it can be done in a few days or a few weeks. We'd be too lucky too pull that off. And there are so many variables. What if he hides like Bin Laden? Or releases Anthrax on his people and US forces? Or just starts fire off nukes towards Israli borders? Far fetched maybe, but what if?

Saying the airlines should just suck it up because they are not making money ignores the fact that many airlines are barely alive. A war would see most if not all in bankruptcy. Even the very strongest would be devastated. Most would be mortally wounded. Airlines may have to suck it up. There may be no choice. But if they do, it will change the airline landscape more than deregulation ever did. USAir gone. UAL gone. AMWest gone. NWA bankrupt. CAL bankrupt. DAL bankrupt. __________ bankrupt?
 
MCOtoATL
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What About Basic Economics?

Fri Aug 30, 2002 7:45 am

While a war would not be good for the airline industry, economic law dictates that while some will falter (and possibly fail,) others will rise to the occasion. If supply plummets, than so will the number of seats offered, and maybe the number of airlines. But to assume that all would fail is a bit of a doomsday attitude. Sure, they will all be hit hard economically, but the survival of the fittest could apply. Larger carriers may have to cut costs and furlough employees, but to say that all carriers would die is a bit naive.

 
Sabena332
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RE: What Does A US/Iraqi War Mean To The Airlines?

Fri Aug 30, 2002 7:47 am

What Does A US/Iraqi War Mean To The Airlines?

A lot of colleagues will loose their job (maybe also me).

Patrick
NZ1's mother is a disgusting crack-whore and his father is a worthless alcoholic!
 
MD88Captain
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RE: What Does A US/Iraqi War Mean To The Airlines?

Fri Aug 30, 2002 7:49 am

Deltaflyer. I think you are mistaken. I think a new war would destroy travel. Booking for Sept 11 are off 25%. Why? Fear of terrorism. Do you think Americans and others would fear flying on American airlines when America is waging war on an Islamic state? Don't you believe that US airlines would become an excellent target for those enraged by American aggression? And I'm not talking 9-11 type attacks. I'm talking Stinger missles.

Do you remember how much international traffic dropped off in the Gulf War? It was huge. How much bigger would it be if people are now really afraid of being a target? How many people will avoid US airlines in order to protest US aggression.
 
MD88Captain
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RE: What Does A US/Iraqi War Mean To The Airlines?

Fri Aug 30, 2002 7:56 am

MCOtoATL. Not all would fail I agree. UAL, America West, and USAirways will fail because they have no cash or ability to raise cash. Others will fail as well. Many others will go into bankruptcy and totally restructure costs while invalidating labor contracts and laying off thousands of employees. No carrier will remain untouched and it will change this industry drastically.
 
jcs17
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RE: What Does A US/Iraqi War Mean To The Airlines?

Fri Aug 30, 2002 11:07 am

The problem with the average American person, they are so ignorant and scared of everything (I'm a proud American so I can say that). The average American will cause the downfall of the airlines, people get all panicky and cancel their reservations as if there is a 1 in 10 chance the plane will crash (well, if your flying China Airlines maybe it really is 1 in 10  Big grin . In fact security will be better during the war than it ever has before. I dont know why so many people think this way and the people dont realize that the most you can do for your country at home during war is to go about your daily life (travel, go to sporting events), these people dont realize that they are hurting the American economy so much by cancelling their travel plans. Too many Americans have this mentality where if we are fighting someone, we ought to cancel everything, and just go to the basement with cans of food and hide for the next 2 years! I dont think this is disrespectful at all to our great defenders of freedom because when the war is over they want to come home to an economy that hasnt been killed, a place where they can get a job. Go to Israel and see people who are in a constant war and you will see people who persevere and go through with daily activities with very nominal worry. Live people! Live!  Angry
America's chickens are coming home to rooooost!
 
ryu2
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RE: What Does A US/Iraqi War Mean To The Airlines?

Fri Aug 30, 2002 11:16 am

If all those airlines go down, maybe the US will have to do what Australia did after Ansett went down, and let foreign air carriers fly domestically... would be very interesting to see that!
 
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yyz717
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RE: What Does A US/Iraqi War Mean To The Airlines?

Fri Aug 30, 2002 12:00 pm

Don't US airlines benefit from lucrative contracts with the US military for troop movements? This may partially allay any downturn in traffic.

I dumped at the gybe mark in strong winds when I looked up at a Porter Q400 on finals. Can't stop spotting.
 
RickB
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RE: What Does A US/Iraqi War Mean To The Airlines?

Fri Aug 30, 2002 6:02 pm

The problem with a US/Iraqi war is that the airlines will be deeply hurt - whilst I agree that Saddam is a despot and needs to be seen off - I think a large scale war will be devestating both during the conflict and for a long, long time afterwards.

An attack on Iraq at the moment will increase Muslim resentment of the US (and any allies), some of these people will be further inclined to strike back at US interests as terrorists. This is evident throughout the world by the simple fact that the more you repress people, the more they fight for ways to strike back - all that will happen is you will turn many people who may dislike the US into people who hate it and will actively seek involvement in destroying US interests through terrorist acts.

You may topple Saddam, but in the process will of created thousands of people who are prepared to commit attrocities against the US - far from eliminating terrorism - you will probably increase it exponentially. In the longterm you could create an atmosphere where people are scared to fly for a long time - which will devastate western economies.

I also think that this will be much, much more difficult than Desert storm, the lack of bases in the area and logistical support since neighbouring countries have already stated that bases in their countries are not to be used for this, the probable lack of overfly rights of countries in the area, the fact that Saddam will know all he has to do is provoke Israel into retaliating for something and that will engulf the whole region into war.

All of this means that the only viable weapons available are carrier based aircraft and long range aircraft such as B52's, B1's and B2's - some of which will be vulnerable especially given the lack of air superiority fighters such as F15's - only carrier based F14's being available. The other important difference is that before you where fighting against well exposed military positions in the middle of the desert which are relatively easy to bomb - this time you will be hitting targets in the middle of cities - huge collateral damage is inevitable especially with the use of 'human' shields - which will rapidly distinguish any public support for the campaign.

The only way the US can fight this war is with long range aircraft and carrier battle groups - I dont know about anyone else but I would be reluctant to position a number of these in the Persian Gulf where they have little room to manouver in the event of the whole region becoming hostile !!

If the US want to topple Saddam - there are other ways to do it rather than a full scale invasion. At the moment - I think containment is a safer bet until the neighbouring countries agree that Saddam has to be dealt with - at which point the whole thing will become much easier.

RickB
 
Guest

RE: What Does A US/Iraqi War Mean To The Airlines?

Fri Aug 30, 2002 11:54 pm

There are a number of factors to bear in mind here when you look at any potential effect on the airline industry.

1) Oil prices - already oil prices have surged ahead in the expectation of a conflict in Iraq, up to levels approaching US$30/bbl. This is very bad news for the airlines as it imposes yet another cost burden on already financially weakened operators, which will mean higher ticket prices ... and which in turn will result in fewer passengers travelling.

2) Fallout from 9/11 - don't forget that anything approximating 9/11 didn't happen prior to the Gulf War. Now, airlines are already in a very shaky state and Americans in particular are very scared to travel overseas.

The added threat of Al Qa'aida terrorism will have the effect of grounding many of the few remaining passengers.

I do not expect this to have much effect on regional airlines operating in areas outside the US and the Middle East. Long haul operations to destinations outside the US should also not be seriously affected.

However, I am gravely concerned about the future for the majority of US airlines. I suspect that a new Gulf conflict - especially one without any legitimate basis by the US - will result in Chapter 7 for major airlines such as American, United and USAirways.

On the other hand, the future is bright for cargo operators! Big grin
 
N79969
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RE: What Does A US/Iraqi War Mean To The Airlines?

Sat Aug 31, 2002 12:10 am

Survival of the fittest assumes that someone is fit. Except for the low cost, no one is really fit. Air travel is purely discretionary-- so people only need the slightest excuse not to go. Airlines are out the revenue and stuck with the costs.

A war would be a real kick in the pants for everyone. The war Cheney, Wolfowitz, and Perle are pushing will be no Gulf War II. It will be far more difficult as many have pointed out. Saddam did not think we would fight the first time, now he knows what the US is about. He will not make it easy like he did last time.
 
Joni
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RE: What Does A US/Iraqi War Mean To The Airlines?

Sat Aug 31, 2002 12:24 am


STT757,

I don't know if that will be reassuring in itself. Remember that there still is no evidence Saddam has anything to do with al-Qaeda (there is, however, evidence bin Laden considers him a "bad muslim"). On the contrary, if the US attacks there is a certainty that a huge portion of the global Arab population will be ready to support terrorist attacks against the US.

With regard to weapons of mass destruction, remember that the United States remains the only country that demonstrably _has_ let its weapons of mass destruction fall into the hands of terrorists (the anthrax in the letters last year).

 
Krushny
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RE: What Does A US/Iraqi War Mean To The Airlines?

Sat Aug 31, 2002 12:26 am

I bet a new war will be a disaster for airlines, like the first Gulf War. The day it started, my company (HQ'd in the USA) suspended indefinitely air travel for its employees, and I guess many major companies did the same. At that time we were transferring a big job from other company location 500 mi away, and all business trips were made by car. Should this happen again, imagine the consequences of a couple of months of no business travel...
Not only would be bad for US airlines, some European flag airlines have gone public since, and could not relay in papa state as in '91.
 
SInGAPORE_AIR
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RE: What Does A US/Iraqi War Mean To The Airlines?

Sat Aug 31, 2002 12:37 am

Let's take United Airlines. From their 2001 report, I can ascertain...

United Airlines spent

Fuel - US$2 476 000 000 / 14.2%
Other costs - US$17 433 000 000 / 85.8%
----
Total costs = US$19 909 000 000 / 100%

That was at an approximate $0.77 a gallon.

How many gallons are in a barrel? Approximately 30?

That means oil for 2001 was $23.1 per barrel.

$42.50 is 62% higher, therefore... ($1.41 a gallon)

Fuel - US$153 512 000 000 / 89.8%
Other costs assuming 0% growth/decrease - US$17 433 000 000 / 10.2%
----
Total costs = US$170 945 000 000 / 100%
Anyone can fly, only the best Soar.
 
SInGAPORE_AIR
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RE: What Does A US/Iraqi War Mean To The Airlines?

Sat Aug 31, 2002 1:48 am

Bloody hell.

How will the airlines cope?!

AMR had fuel bills of US$2 888 000 000, similar to that of UAL.

How are they supposed to surivve with a $155 billion fuel bill?!

God help them all.
Anyone can fly, only the best Soar.
 
thomacf
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RE: What Does A US/Iraqi War Mean To The Airlines?

Sat Aug 31, 2002 3:11 am

The airline industry will suffer more than ever before just at the threat of rising oil prices leading up to a conflict.

In terms of the War issue, I think everyone is forgetting one thing that the Gulf War taught us and that is Iraqi soldiers won't fight back! They didn't the first time and they won't again. The US knows this and that is why they know they can go in alone. The people hate Saddam and the US I feel will look good in the end. During the Gulf War Iraqi's were surrending in the hundreds sometimes thousands. They were scared of CNN reporters and rumors of attacks in certain areas that never took place. It will be short but finding Saddam will be a huge challenge.

The worst thing about all of this is that all the hipe alone will kill the stock market, oil prices will sky rocket and the airline industry (travel industry in general) will get crushed.
 
SInGAPORE_AIR
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RE: What Does A US/Iraqi War Mean To The Airlines?

Sat Aug 31, 2002 6:12 am

"They didn't the first time and they won't again. The US knows this and that is why they know they can go in alone. The people hate Saddam and the US I feel will look good in the end."

I hope so. The quicker this ends, the better for the world, and the better for the airlines. God knows how if it is a prolonged conflict, they can saddle a US$153 512 000 000 fuel bill.
Anyone can fly, only the best Soar.
 
addi375
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RE: What Does A US/Iraqi War Mean To The Airlines?

Sat Aug 31, 2002 9:53 am

Not only the airline industry will suffer. EVERYONE will.
I am an american, and proud to be and american, and what I am about to say my piss off some people, but our biggest problem right now is not Saddam, its the person who wants the start the war. Daddy started it and Jr I guess gotta finish it.
Elections are almost here, and during war time........ anyone get where I am goign with this?
Walmart prices with Bloomies service...........
 
SInGAPORE_AIR
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RE: What Does A US/Iraqi War Mean To The Airlines?

Sat Aug 31, 2002 4:06 pm

My maths is suspect. Please hold the line while checks are carried out.
Anyone can fly, only the best Soar.
 
GDB
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RE: What Does A US/Iraqi War Mean To The Airlines?

Sat Aug 31, 2002 4:22 pm

I remember what is was like working in the industry last time, I wouldn't expect to keep my job this time if a major slump was triggered.
Maybe people will be a bit more sensible about the real risks this time, but I doubt it.
Gulf War 1 was the first major armed conflict involving the US since Vietnam, after 20 years of mid-East based terrorism, so maybe that was a factor in the panic about flying last time.
What is a bit ironic is that the nation who wants to attack, is by far the worst for it's citizens being unwilling to fly, that's not flame bait, it's the truth I'm afraid.
With US Airways in chapter 11, maybe UA not far off the same, could a renewed slump push othe major US carriers into Chapter 11, a sort of domino effect as the airlines going through the process get effectively a breathing space requiring those not yet in the same situation following suit to stay competitive?.
Think what that would do to Boeing.
 
Guest

RE: What Does A US/Iraqi War Mean To The Airlines?

Sat Aug 31, 2002 5:09 pm

Thomacf, there's a world of difference between conscript troops fighting a rearguard action and well trained troops defending their homeland and fighting an urban war. Just look at the closing months of the Second World War to see what it would be like.