Nut cuttin time...
War has started...will it be the nail for UAL/US Air??
UAL, Continental lead airline sector decline
March 20, 2003 09:00:00 (ET)
NEW YORK (CBS.MW) -- Investors backed away from airline stocks Thursday amid worry that the already battered sector would suffer greatly during and after the campaign to remove weapons from Iraq.
In the early going, the stock of every major carrier headed south. The Amex Airline Index last landed at 29.30, off 2 percent, as it headed on a downward path that could erase the 16 percent gain it has enjoyed since bottoming to an all-time low March 11.
Continental Airlines tossed the first salvo before the bombing in Iraq even began and said it will cut another 1,200 jobs as it wages its own war to stay out of bankruptcy.
The Houston-based carrier said after the bell Wednesday that its plans to do away with 125 pilots, 500 reservation agents, 350 airport agents and 225 other workers, including four senior executives who announced their retirements in tandem with the layoffs, will save it $500 million annually.
But Chief Executive Gordon Bethune warned that more job cuts would come if military conflict in Iraq - launched late Wednesday - is prolonged.
"It is clear to me that other airlines will fail," Bethune said on a conference call with reporters. "We are not going to be next."
Shareholders weren't too sure, subtracting 17 cents, or 3.3 percent, to place Continental (CAL, Trade) shares at $5.05.
Most analyst believe others will follow US Airways and UAL Corp., both of which sought Chapter 11 protection amid industry losses approaching $20 billion over two years.
Earlier this week, credit agency Standard & Poor's warned that "further airlines bankruptcies are likely."
Though United Airlines parent UAL(UAL, Trade) already is in bankruptcy, liquidation is becoming a growing possibility, the company said earlier this week. Shareholders remembered that Thursday, taking out another 7.21 percent, or 6 cents, to leave the stock last trading at 78 cents.
On bankruptcy watch already, American Airlines parent AMR Corp. (AMR, Trade) erased 5 cents, or 2.7 percent, to $1.79 while Airtran (AAI, Trade) was off 7 cents, or 1.1 percent, to $6.03 and ATA Holdings (ATAH, Trade) slipped 7 cents, or 1.7 percent, to $3.94.
Even those considered surefire survivors lost in early action. Delta (DAL, Trade) shares tumbled 31 cents, or 3.5 percent, to $8.53 while Northwest gave up 23 cents, or 3.1 percent, to $7.13.
Southwest (LUV, Trade) lost 22 cents, or 1.5 percent, to $14.05.