Boeing CEO fears bankruptcies
Reuters, Seattle
Boeing Co. Chairman Phil Condit said on Friday he sees major airline bankruptcies ahead as the industry copes with a crisis that could be ten times worse than the slowdown during the 1990- 1991 Gulf War.
In an interview with CNBC television, Condit defended Boeing's decision to let go up to 30,000 workers from its world-leading commercial jet unit and insisted the nation's airways have never been safer, despite the Sept. 11 U.S. hijack attacks.
Already Midway Airlines has gone bankrupt, followed by Swissair , Belgium's Sabena and charter airline City Bird. Experts see more failures ahead, despite a US$15 billion U.S. government bailout package for domestic carriers.
"I think we can see bankruptcies in the U.S. airlines in the next 30 or 60 days," Condit said. "I've seen different reports and different analyses. I looked at one yesterday, an academic analysis, that said certainly half, maybe more than half."
Air travel has plunged following the hijackings, in which four Boeing-built jets were crashed, leaving nearly 6,000 people missing or dead, New York's World Trade Center in ruins and a huge hole in the side of the Pentagon near Washington, D.C.
Ticket purchases also slumped when U.S.-led forces attacked Iraqi occupiers in Kuwait in 1991, but this slowdown will be much worse, Condit said.
"At the peak, the Gulf War produced a decline of 2 percent in traffic," Condit said. "Best guess today is that this will be five to 10 times worse than what we saw in the Gulf War."
The downturn has slashed demand for jets built by Boeing and rival Airbus SAS, and Condit said this slump would be the worst or second-worst in the history of air travel, forcing layoffs at Boeing's Seattle-based jet unit.
"The trade here is do you put 20 or 30 thousand people out of a job or you wait longer and put 80,000 people out of a job," Condit said.
Chicago-based Boeing has already cut its forecasts for jet deliveries to 500 in 2001 from a previous estimate of 538; to 400 in 2002 from 510 to 520; and to an undetermined number below 400 in 2003.
Asked if analyst projections for a 2003 total below 300 were possible, Condit replied: "It's possible, yes."
Condit acknowledged that Boeing's earnings would suffer as a result of the cuts, but said the company had not yet determined the extent of the damage.