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Front Page » Top Stories » Impact Of Iraq Invasion On Local Aviation Industry Could Mirror Effects Of Gulf War

Impact Of Iraq Invasion On Local Aviation Industry Could Mirror Effects Of Gulf War

Written by on March 20, 2003

By Susan Stabley
An airline trade association says the economic impact of a US military invasion of Iraq would mirror the crisis the industry suffered after the first Gulf War.

The March 11 report forecasts $4 billion to $13 billion in added aviation losses, a 15% traffic decline, a 70,000 jobs cut and elimination of 2,200 flights. These possible outcomes are from the Air Transport Association, a national group whose member airlines transport more than 95% of all passenger and cargo traffic in the US.

Yet two area aviation consultants said Monday that Miami International Airport may sidestep some of the fallout from any Iraqi conflict.

Rick Elder, a Miami-Dade aviation director in the 1990s and now a consultant, said that after the first Gulf War the airport’s European market dropped off but the airport remained resilient.

That’s because of the "incredibly strong Latin market," Mr. Elder said. Miami International’s influx of domestic travelers due to tourism and conventions also remained stable, he said.

"At that time," he said, "we did not see the ugly face of terrorism."

The impact of fears of terrorism on travel or actual attacks on airlines will be the "wild card" this time around, he said.

Bob Booth – founder and chairman of AVMAN, a Miami-based aviation management consulting group – agrees that Miami International will continue to be bolstered by travelers from Latin America and the Caribbean, where air travel is essential. He said he was familiar with the air transport group’s report.

"It’s going to affect everybody," Mr. Booth said, "but it will affect us less than in other parts of the country."

The most recent domestic and international passenger numbers for Miami International show a 2% one-year increase, with more domestic flyers balancing out a slight drop in international numbers.

In January, 2.64 million passengers traveled through Miami International, 1.25 million of them on international flights, off 0.6% from January 2002. More international travelers arrived in Miami (658,359) than departed (597,054).

Domestically, 1.39 million passengers flew from the airport, up 4.48% from January 2002. More passengers, 716,221, boarded flights, with 676,373 arriving.

The domestic increase offset the slip in international. Overall, January traffic rose 2.01%.

Miami International’s fall in international travelers parallels major airports nationally, according to statistics from the Miami-Dade Aviation Department. While the airport ranked third in the US with 15.2 million international travelers in 2001, that was a 6% drop from the prior year. The two top airports – New York’s John F. Kennedy and Los Angeles – had 10% and 8% drops respectively. None of the top 10 airports increased international totals.

Passenger traffic in 2002 was 30 million, according to a February report by Aviation Director Angela Gittens. That number shows a 5% drop from 2001, with a 6% decrease in international travelers and a 4% drop in domestic use.

The airport’s recovery from the 9/11 attacks exceeded expectations, though Ms. Gittens also said last month that passenger traffic is "stalled" at a level that’s off 11% from pre-9/11 numbers. Aviation officials hoped traffic would return to those levels by 2004 but now are expecting a full recovery in 2006, dependant on a rebounding national economy and an economic revival in key Latin American markets.

Airport officials are already working to add international links, with a focus on African airlines. April trips to Nigeria and South Africa aim to help woo African airlines, linking to Kenya, Nigeria and South Africa.

A three-year $620,000 contract with consultants SH&E seeks to target 26 new international routes plus six low-fare domestic carriers.

The goal: add 10 new international routes the first year, eight the second year and eight the third. Officials also hope to target two low-fare carriers each of the three years.

Yet all that might not make up for the loss of a major airline.

Experts expect bankruptcy filings soon from AMR, parent of American Airlines, Miami’s largest carrier and employer of about 9,000 locally.

"American Airlines will file by fall if not before," Mr. Elder forecast. "Regardless of the war, the die is cast."

Already filed for bankruptcy protection is UAL, parent of the world’s second-largest carrier, United Airlines. US Airways is now trying to pull out of bankruptcy. Continental Airlines expects to lose money this year. And Delta Air Lines, the nation’s third-largest carrier, said it expects "negative cash flow from operations this quarter due to concern over a potential war with Iraq," according to the Associated Press.

Before the first Gulf War, the industry reported $3.9 billion in net profits from 1984 to 1989, according to the Air Transport Association. In the four years following the war, the industry lost more than $13 billion and 25,000 jobs, and seven airlines went into bankruptcy. Four no longer exist: Pan Am, Eastern, Midway and Markair.

Before Sept. 11, 2001, the airline industry was already expecting net losses of $3.5 billion. Traffic was expected to rise by only 1%. Mr. Elder notes that many major airlines were in deep trouble before the attacks.

After the attacks and the temporary closings of airports, a federal infusion of $5 billion plus $10 billion in loan guarantees helped hold losses to about $7.7 billion. Those losses could have easily topped out at more than $12 billion, according to the Air Transport Association.

As the US embarks on another Gulf War, the industry continues to reel from financial problems that are exacerbated by the 9/11 tragedies, rising fuel prices and added security costs.

Fuel prices have more than doubled in the past year, according to the Air Transport Association, up 108% from 57 cents a gallon in February 2002 to $1.20 in February 2003. Total losses since 9/11 have been estimated at $18 billion and the coming year is expected to include $6.7 billion more in losses if there is no war.