United, American say they each plan to cut 20,000 jobs. White House, Congress prepare a rescue plan.
The nation's two biggest airlines said Wednesday that they were cutting 40,000 jobs, putting more pressure on congressional leaders and White House officials rushing to craft a multibillion-dollar aid package for the industry.
The announcements by American Airlines and United Airlines --which are cutting or laying off 20,000 employees each--came as executives of the nation's carriers warned a House committee that the industry's growing cash crunch since last week's terrorist attacks will push a number of airlines into bankruptcy.
During a House Transportation Committee hearing, lawmakers from both parties expressed support for an airline industry rescue plan, which could come before the House today or Friday. Bush administration officials and congressional leaders still were working on details of a plan Wednesday. The Senate Commerce, Science and Transportation Committee has scheduled a hearing on the issue today.
Since the Sept. 11 attacks, U.S. carriers have slashed their flights by about 20% and announced more than 68,000 job cuts or layoffs, and analysts predict as many as 100,000 are likely. On Wednesday, No. 1 carrier American said it will cut at least 20,000 jobs, and United said it will lay off about the same number, or 20% of its work force.
Two American and two United jets were hijacked by terrorists and crashed into the World Trade Center twin towers, the Pentagon and into a field in Pennsylvania.
"I have declared a state of emergency at American Airlines," American Chairman and Chief Executive Donald Carty wrote in a letter to employees. "This declaration is an official recognition that--hard as it may be to accept--our company's very survival depends on dramatic change to our operations, our schedule and, worst of all, our staffing levels."
The $600-billion airline industry is projected to post a record-breaking loss of about $7 billion for the full year--and most airlines' cash reserves are expected to run out within a month. The proposed aid package would provide $5 billion in cash and $12.5 billion in loan guarantees.
Douglas Parker, chairman, president and CEO of America West Airlines , told the committee that several airlines are waiting to see what Congress does, "and if something can't be done, they would very likely be forced to file bankruptcy in a number of days."
A number of lawmakers and union leaders, led by Teamsters President James P. Hoffa, said any aid package should include financial relief for displaced workers. "If we are helping the airlines survive, we should do no less for their employees," Hoffa said. Late Wednesday, Sen. Jean Carnahan (D-Mo.) said she plans to push for $2.5 billion in aid for laid-off employees that would be used to help fund job training and extended benefits.
Bush administration officials and members of Congress have objected to calling any aid plan a "bailout," and industry executives were mindful of the semantics. "Our proposal is only intended to stabilize the financial condition of this industry," said Delta Air Lines Chairman and CEO Leo F. Mullin. "It is not a bailout. . . . The need to deal with the situation is absolutely urgent."
Lawmakers also suggested that airline executives curb bonuses and other management perks before they receive federal financial aid. Some members of Congress are considering seeking to limit executive pay.
"I strongly support providing aid to the airline industry to help them through this rough period, but I do not support signing a blank check," said Rep. Robert Menendez (D-N.J.). "I think it's fair to ask some things in return that in the end will ultimately benefit us all, things like taking proactive responsibility for safety issues, guarantees for labor and considering limitations on executive pay and management bonuses."
"Sacrifices need to be made by all," Menendez said.
In response, Mullin said airline executives are going to pay an enormous price because their compensation is tied to performance and stock options.
Other lawmakers were careful to draw distinctions between the government bailouts of Chrysler Corp. and Lockheed Corp. in the 1970s and the airlines' current troubles. "The crisis we face now was imposed by causes almost totally out of control of the industry," said Rep. Johnny Isakson (R-Ga.).
But even with financial aid from the government, Mullin said, "there will still be substantial layoffs." On Tuesday, only 29% of Delta's airline seats were filled with passengers.
Airline executives said it might take a year to get back to the passenger levels that existed before the terrorist attacks. And when that happens, the employment levels could rise again.
The carriers have not yet detailed the job cuts or layoffs, leaving employees on edge and labor leaders scrambling to keep up with the succession of announcements.
"Like everything else in the last week, the magnitude is like nothing we've ever seen. . . . It's going to take a couple of days just to figure out how to lay off 20,000 workers," said Michael Buckley of the AFL-CIO.
A number of lawmakers said they were worried about other industries--from travel agents, hotels, rental car companies to the King Nut Co. in Solon, Ohio, which puts peanuts in the bags that are passed out on planes.
Rep. Michael K. Simpson (R-Idaho) said he wanted to know how much of the losses are due to bad business decisions made before the terrorist attacks. "If we are bailing out bad decisions that were made prior to Sept. 11, then I have some concerns," he said.
The airlines also are pressing for a cap on their liability stemming from the use of their hijacked jets in the attacks.
Addressing this issue, Mullin told the Senate committee that unless Congress resolves the liability issue, "the massive response time and uncertainty as to the outcome of litigation will almost certainly frustrate airlines' ability to raise needed capital in the short term.
"In addition, it may well prevent airlines from purchasing necessary insurance until such time as the litigation is concluded. And what's more, some carriers are reporting drastic increases in premiums, and other carriers fear that insurance may not be available at any price," Mullin said.
Under the industry's proposal, airlines could still be sued for deaths of airline passengers, but they want exemption from liabilityfor injuries to people and damage to property on the ground.
Many insurance companies have notified carriers of "astronomic premium increases," Mullin said, adding that these increases could approach $1 billion for the U.S. airline industry.
If a financial aid bill is approved, Mullin said the industry would be amenable to allocating funds to companies based on their size and done so under Transportation Department supervision.
Rep. James L. Oberstar (D-Minn.), the committee's top Democrat, added that the $600-billion airline industry is "teetering on the edge of an economic abyss."
He warned that if a number of airlines go bankrupt, the public would face higher fares and less service.
"A healthy commercial airline system is vital to the U.S. economy and to our national defense," Oberstar said.
Last year, Oberstar said, 1.2 million U.S. airline employees served 670 million passengers traveling 700 billion miles, carrying 25 billion ton-miles of freight.
"Aviation, at 10% of the gross domestic product, is the cornerstone upon which all other elements of our society rely for economic growth," he said.
 
Times staff writer Nancy Cleeland contributed to this report.