War worsens outlook for travel industry - East Valley Tribune: Business

War worsens outlook for travel industry

Print
Font Size:
Default font size
Larger font size

Posted: Tuesday, March 25, 2003 11:01 am | Updated: 1:31 pm, Thu Oct 6, 2011.

NEW YORK - The travel industry's grim outlook worsened Monday, and airline and hotel stocks gave back some of last week's heady gains, on fears that a war could be more drawn-out than investors originally anticipated.

Delta Air Lines, the nation's third largest carrier, said it would shrink its network by about 12 percent, reducing service domestically and internationally as a result of fewer travelers since the war began in Iraq. A spokeswoman said the company, whose stock plunged 15 percent Monday, has not made any decisions yet on potential layoffs.

"It looks like they're waiting to see how the war plays out," said Karen Miller, a spokeswoman for the Air Line Pilots Association in Atlanta.

The cutbacks at Delta followed similar moves made last week by United Airlines, Continental Airlines and Northwest Airlines, which said it would lay off 4,900 employees and trim its flight schedule by 12 percent.

With the industry's woes mounting, lobbying for federal aid has intensified in recent days but no deals have been struck.

Transportation Secretary Norman Mineta, who advocates airline relief, met with Bush administration officials Monday. But no aid was proposed for the airlines in the $75 billion war-spending bill crafted at the White House on Monday, dashing the hopes of some industry officials. Most of the money in the Bush administration bill would go to the Department of Defense.

Congress may support extending war-risk insurance, which protects airlines from liability claims for injuries resulting from war or terrorism, and reimbursing them for new security costs, such as bulletproof cockpit doors, said Gary Burns, spokesman for House aviation subcommittee chairman John Mica, R-Fla.

Major airlines have asked for much more, though, including up to $9 billion in tax cuts.

"Their proposal to receive a tax holiday has met with considerable skepticism on the Hill," Burns said.

The hotel industry's troubles were also apparent Monday as Starwood Hotels & Resorts Worldwide Inc., owner of the Sheraton and Westin brands, withdrew its first quarter and full year earnings forecasts. The news sent its stock price tumbling.

The White Plains, N.Y.-based company said it was surprised by the "significant deterioration in business" as a result of worsening geopolitical conditions. Starwood also said its bottom line has been squeezed by higher energy costs this winter.

Merrill Lynch analyst David Anders said in a report released Monday that he expects Starwood to lose a penny a share in the first quarter, revising his previous estimate of a gain of 4 cents per share.

Starwood's stock price fell $2.69, or 10 percent, to close Monday at $24.11 on the New York Stock Exchange.

Wall Street's opinion of other hoteliers also soured. Shares of Hilton Hotel Corp. fell $1.27 to $11.64, while those of Marriott International declined $3.02 to $31.86.

Last week, travel industry stocks rose sharply on hopes that the war in Iraq would end relatively quickly and that the drop in demand in anticipation of military conflict would soon be restored. That prognosis was called into question over the weekend, though, as it appeared U.S.-led forces would meet stiffer resistance in Iraq than investors had assumed.

All major carriers came under pressure on Wall Street on Monday.

American Airlines' stock dropped 30 cents, or 12.6 percent, to $2.08. The Fort Worth, Texas-based airline is considered likely to be the next major carrier to file for bankruptcy.

Shares of United, the No. 2 carrier, slipped 2 cents to 83 cents. The Chicago-based airline is currently restructuring under Chapter 11 of federal bankruptcy law, but recently said it could be forced to liquidate.

Shares of Continental fell $1.17 to $5.65, and those of Northwest Airlines declined 94 cents to $7.36 on the Nasdaq Stock Market. Delta's stock fell $1.73 to $9.52.

  • Discuss

Attorney General Forum - Question 1

Attorney General candidates Republican Mark Brnovich and Democrat Felecia Rotellini debate at ...

'EV Women in Business'

A PDF of the Tribune special section, featuring a mix of sponsored content from our loyal advertisers and newsroom coverage of the East Valley business community.

Your Az Jobs