Terror fears, weak economy dog airlines

By Keith Reed, Globe Staff, 4/10/2003

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he pall cast over the airline industry by a weak economy, the Sept. 11 terror attacks, low demand, and high costs is expected to continue for months, despite US gains yesterday in the war in Iraq, airline specialists said.

At Logan International Aiport, travelers said an end to the war would make them likely to fly more often, but specialists said it will take more than that to turn around the troubled industry. The end of hostilities in Iraq will not be ''a lifesaver'' for the airline business, said Dan Kasper, a Cambridge economist and managing director of LECG, a consulting firm.

''It is obviously [going to be] good news, and whatever downward-demand concerns there were about the war will go away, and it should boost trans-Atlantic routes,'' he said. ''But I suspect there will be lingering concern about terrorism.

''It will give a shot in the arm to demand, but the questions is to what level will it go back? Before the outbreak of shooting, demand was off 12 to 15 percent from pre-9/11 numbers. Those numbers had plateaued, and the economy has not gotten any better.''

Nevertheless, ''I think absolutely I'll do more traveling, once it's over,'' said Bernie Zalianskas, a South Shore businessman who was at Logan yesterday to pick up a colleague. Since the terror attacks, he has continued to travel by air for business, but with caution. ''To fly to go see a client -- it used to be no problem. But now I've been saying, `Do I really have to go there?' ''

Waiting to board a shuttle back to New York, software engineer Penny Freeman said she has had similar reservations. A wife and mother, she canceled a business trip to London a month ago out of fear that a terrorist attack could leave her family without her.

''I've definitely been more careful about flying. I've been looking at other passengers and making sure I was at the front of the plane so I could be the first person to get off if it came to that,'' Freeman said. ''I'd like to see the end of the war.''

But even after the war ends, ''There's no one thing that will happen that will signal a recovery,'' said Cathy Keefe, a spokeswoman for the Travel Industry Association of America, in Washington, D.C. ''What's interesting is that the economy -- not the war -- was the determining factor for many people who changed their plans for travel this year.''

Yesterday, the association released the results of a survey indicating that 71 percent of US leisure travelers would not go overseas during the summer, and that 26 percent of business travelers plan to travel less this year than last -- bad news for an industry hoping for a quick rebound.

The survey also showed that most leisure travelers plan road rather than air trips this summer.

An official with the Air Transport Association, a trade group, said it took about six months for demand to bounce back to prewar levels after the 1991 Gulf War, and demand has yet to recover to the levels before Sept. 11, 2001. The association is not predicting when demand might return. The economy is still weak, and the threat of SARS, a respiratory disease that first appeared in Asia, has sharply reduced traffic in the Pacific.

Last month, before the war started, the association said a conflict with Iraq could trigger airline bankruptcies and be worse for the industry than the first Gulf War. Delta Air Lines, which had cut 12 percent of its capacity -- including many North Atlantic flights from New York and four daily shuttle flights from Boston to LaGuardia Airport -- said those cuts will remain in place at least through the month.

''We will evaluate whether to reinstate the service as soon as passenger demand returns,'' said spokeswoman Katie Connell. ''To date, we have not seen the return. We hope to reinstate service as soon as possible.''

Still, the airlines' woes have not put a damper on the plans of Mary McDonogh, who yesterday was waiting to board a flight from Logan to Milan. The war or fears of terrorism won't keep her out of the skies, she said. But SARS is a different story.

''I'll tell you one thing that will have an effect: that disease,'' she said. ''I think that's the biggest terror that's going to affect people.''

Keith Reed can be reached at reed@globe.com.

This story ran on page C1 of the Boston Globe on 4/10/2003.
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