National cuts workforce, reduces operations 20%

Monday, Sept. 17, 2001 | 10:09 a.m.

Facing a sharp decline in business after Tuesday's terrorist strikes, National Airlines has laid off 300 full- and part-time employees and cut operations by 20 percent.

The Las Vegas-based airline, operating since December under Chapter 11 bankruptcy protection, announced Saturday that cuts were being made across all parts of the company's operation. Most of the layoffs were in Las Vegas.

"We are offering employees who are able, voluntary leaves of absence without pay in order to reduce the number of forced furloughs that will be required," said National President and Chief Executive Officer Mike Conway. "The service reductions will allow National to continue to accommodate most of its booked customers, while at the same time offer a schedule that is likely to better match our flight operations with the expected downturn in demand."

As part of the service reduction, National is suspending its daily roundtrip flight between Las Vegas and Washington's Ronald Reagan National Airport -- a route the company fought hard with competitors to win. Reagan National has been closed indefinitely in the wake of Tuesday's terrorist attacks on the World Trade Center in New York and the Pentagon in Washington.

Reagan National is near central Washington and several important buildings, including the Capitol, the White House and several monuments. The airport's closure is a move to protect those landmarks.

The airline also is speeding up a previously announced flight cancellation, between Las Vegas and New York's John F. Kennedy International Airport, and canceling another roundtrip flight between Las Vegas and New York. The original plan to cancel a New York flight Oct. 26 was made effective immediately and the second cancellation means National now has four daily round trips to JFK Airport.

On Oct. 26, National was to have begun a third roundtrip flight between Las Vegas and Miami. Now, that has been postponed until Feb. 14.

Also, beginning Sept. 24, National will reduce existing daily service on some routes to peak and off-peak service. That means on days when a flight isn't full, the airline may cancel it and consolidate passengers to another flight bound for the same destination. Conway said the airline would be in contact with customers affected by those types of changes.

National has negotiated with one of the companies that lease its 16 Boeing 757 jets to take back the aircraft. Conway did not disclose how much the airline would save with one less jet. National now has a fleet of 15 planes, using one of them as a spare during maintenance cycles.

Most of the workforce reductions involve Las Vegas employees. Conway said those employees would be hired back as conditions improve.

But analysts following the airline industry are skeptical that some carriers are going to survive the economic downturn that will accompany last week's terrorist attack involving the hijacking of four commercial airliners. National is high on the list of airlines in jeopardy, said Mike Boyd of the Boyd Group, an Evergreen, Colo.-based aviation consultant.

"It's not going to be good for any airline, but National may be going right down the ceramic fixture," Boyd said Friday.

Another airline analyst, Sam Buttrick of UBS Warburg, estimated that the terrorist attack would cost the airline industry $2.1 billion this year.

Buttrick said airlines that would be most vulnerable to the post-attack crunch would be big carriers flying long distances, carriers on the East Coast and airlines flying out of the New York area. Most of National's routes are long-haul routes and two of its most lucrative routes have been flights to and from JFK and Newark, N.J., which are within miles of Manhattan.

Analysts say they're anticipating the worst because in 1991, when the threat of terrorism punctuated the era of the Gulf War, there was a severe downturn.

"Now, it's not just a threat," said Adam Pilarski, senior vice president of Avitas, a Chantilly, Va. airline consultant. "This is actual terrorism and the successful hijacking of four airliners. It's not the old-fashioned terrorists that hijack a plane and negotiate for political goals."

Pilarski said an American counterstrike against the perpetrators of last week's attacks could be devastating to the aviation industry

"(President) Bush is saying we will punish the guilty and those who harbor them," Pilarski said. "But the terrorists say if they (Americans) attack us, we'll have our revenge. That will be in the minds of the traveling public and it will scare people even more. Nothing super-good will be happening."

Pilarski said airlines would attempt to cut fixed costs, like flight crews and aircraft leases, to hold on. That explains the layoffs and National's return of one of its leased jets to save money.

Some aviation experts say that in addition to battling low demand due to fearful travelers, a soft economy that already was hurting the industry and higher fuel costs that cut into their bottom lines, airlines also will have to suffer through some of the administrative costs associated with new security procedures implemented by the Federal Aviation Administration.

"This is the biggest joke since Rowan & Martin," Boyd said of the FAA's new security procedures. "They've just put a lot of eyewash on the problem. FAA security has been bad for years, but we saw how it broke down badly on Tuesday."

Boyd said some of the new procedures will do nothing to improve air safety, but will cost airlines and airports in flight delays and lost productivity.

He was particularly critical of the FAA's ban on parking within 300 feet of an air terminal and the elimination of curbside baggage check-ins -- both of which have had impacts on Las Vegas operations.

McCarran International Airport lost 300 parking spaces in its short-term lot as a result of the ban and Certified Airline Passenger Service, an off-terminal baggage check-in service based in Henderson, has suspended operations while the new FAA rules on check-ins are in effect.

Boyd said that instead of imposing some of the new requirements, the FAA should scrutinize its own screening of people who have clearance to ramps and aircraft.

An airline analyst for an Internet travel site concurs.

"These knee-jerk reactions by the FAA have put a stranglehold on airlines," said Donald Kimball, an analyst for OneTravel.com, Minneapolis.

"They're (FAA) doing things that will make travel much more inconvenient without making things any safer," Kimball said. "Take the 300-foot parking ban from the terminals. How many times has a car bomb been used to hijack an airliner? They're now banning knives. Why were they even allowed in the first place? It's a felony to bring a knife into a federal courthouse but you could take a knife aboard a plane until this week."

Kimball also was critical of the effort to check all tickets at security checkpoints -- which contributes to a delay that has led some airlines to ask their customers to arrive at the airport three hours before flight time.

"When was the last time an airliner was hijacked by somebody without a ticket?" he asked.

Keeping relatives away from gates will affect the bottom lines of some of the retail outlets beyond the security checkpoint, Kimball said, which ultimately will hurt airports.

Boyd said a stunt by a Northwest Airlines flight crew in Phoenix last weeks illustrates some of the flaws of the FAA's new security rules. Boyd said the crew carried knives, corkscrews and "everything short of a nuclear device" through the security checkpoint without getting stopped, probably because they were flight crewmembers, who normally aren't scrutinized as much as passengers.

"The people need to stand up to the FAA," Boyd said. "I would think your (Las Vegas) hotel industry would be concerned about this. Until somebody holds the FAA accountable on some of these rules, it's going to negatively affect your economy."

Meanwhile, National Airlines' Conway conceded that the job of keeping his company afloat got harder Tuesday.

In an interview Sunday, Conway said discussions continued last week with potential buyers and investors, but he acknowledged that the investment climate changed dramatically after the hijackings.

"It shouldn't come as a surprise to anybody that everybody is a little more cautious in investment decisions and we'll have to see what happens on Wall Street when trading begins Monday morning to see just how much investor sentiment has changed," Conway said. "How could it not after what has happened in the last few days?"

Conway said it could take months for air travel to return to normal. He did not divulge the status of National's advanced bookings. Fall is traditionally a slow period for airlines with traffic picking up around the holidays. Las Vegas normally doesn't feel the full impact of the fall slowdown since it's a strong period for conventions. But the terrorist attack has wiped at least 10 conventions off the Las Vegas meeting calendar.

"In my view, there is no precedent for what is going on," Conway said. "It's not a cyclical downturn, it's not even just a threat of terrorism like the Gulf War."

Conway said how quickly things return to normal could depend on if and when a military action begins. That, he said, could instill some confidence in the near term and, for some airlines, it could provide a revenue stream, since commercial carriers served as troop transports during the Gulf War. And, he feels that Las Vegas would be one of the early beneficiaries if things began returning to normal.

"Las Vegas has shown a resiliency with a better arsenal of enticements to get back to a more normal lifestyle or pattern than other cities," Conway said. "And we still have to get people here."

But Conway admitted that probably the last thing on people's minds last week was to go have a good time in Las Vegas.

Conway also is pinning some hope on economic aid from Congress.

Although the U.S. House of Representatives failed last week to adopt a measure that would have given $2.5 billion in direct aid and $12.5 billion in loan guarantees to the airline industry, lawmakers have indicated they will try for passage again this week.

Conway did not say how much the grounding of the airline for three days cost the company, which has been seeking a buyer since May. The company operated 54 of its 58 flights Saturday and, like most airlines, has focused primarily on getting stranded passengers to their destinations and moving planes into position for its normal schedule.

National didn't have any athletic charter flights scheduled over the weekend. The airline is the charter carrier for the UNLV football team and Conway said the airline also has charter contracts for some Major League Baseball teams that are in playoff contention. He did not specify with what teams the airline has contracts.

National is due back in U.S. Bankruptcy Court next month. A status hearing postponed on the day of the attack was rescheduled.

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