March 31, 2003
Yesterday the stock of United Airlines, with 625 airplanes, was de-listed by the New York Stock Exchange. AMR Corporation, with 1,124 airplanes is considering its own bankruptcy petition, seeking legal protection against the lawful claims of its creditors and lenders for payments due them. They follow a number of other airlines into bankruptcy, and are likely to be followed by others, such as Delta Airlines (622 airplanes) and Continental Group (554 airplanes).
The relief sought by the bankruptcy proceeding seeks to give some creditors a privileged position, to the disadvantage of the lenders and leasors who have financed the purchase of the airplanes. While labour costs are being negotiated, operations continue, with the ongoing claims of suppliers being met, but the claims of the lenders and leasors are to be deferred. The continuing drag of large lease and bond payments is causing the downdraft.
The most recent spate of nightmares that haunt the airline industry (manufacturers, airlines, and leasing/lending companies), began with the
Asian crisis of 1997-8, and has been compounded by:
[1] the events of September 11, 2001,
[2] the US war on terrorism,
[3] the US invasion of Afghanistan,
[4] the US invasion of Iraq, and
[5] the SARS virus.
The number of passengers is declining, especially on international routes. Passenger antipathies are created by ill treatment, bureaucratic delays over visas, and other forms of inconvenience and humiliation. Suspicion that some ethnic groups pose a security risk to the destination countries contributes to tourist disinterest. People who pay large sums for an air ticket are accustomed to courtesy and respect, and in the present security climate, many prefer to stay home and watch the cruel and insane war on TV.
The war in Iraq is one of total air superiority by the US/UK/AU invaders. The Iraqi's have only a limited defence capability, and have not opposed the bombers and fighters with their own small fleet of fighter aircraft. The incessant rain of bombs, rockets and Tomahawk missiles onto Baghdad and other Iraqi cities is matched only by the fall of commercial airliners around the world, especially in the US.
The US aviation industry has asked for government help, primarily the lowering of fuel costs by rescinding the four cents per gallon tax on jet fuel, and releasing oil from the strategic reserve. The request for federal grants, loans and loan guarantees has been on the table for a number of years, and without a significant public bailout, it is easy to see how a great many planes could fall into long-term storage in the Arizona desert.
The situation is a serious one for the entire US economy, as pointed out by James C. May, President and Chief Executive Officer of the Air Transport Association of America in his testimony February 13 to the US Senate Committee on Energy and Natural Resources in their hearing on Oil Supply and Prices. The full statement was reprinted in the previous Worldview article, Is This the REAL Cause of the Iraq War?.
In the paragraph before his concluding one, Mr. May said, "Mr. Chairman, the national economy has much riding on the outcome of our engagement with Iraq. Even before we enter the fray, however, the Congress and the administration can take steps in the area of energy policy to control the runaway price spiral currently underway. We urge you to repeal the 4.3 cents per gallon jet fuel tax now and to call upon the administration to release crude oil from the strategic petroleum reserves in order to deliver some short term economic relief for the industry and ultimately our customers."
The phrase "even before we enter the fray" does cause a start. It suggests that Mr. May was aware, at that early time, there was to be a "fray" with Iraq. The senators who heard his remarks apparently were not attuned to the nuance he alluded to. The implication is clear to all; Iraq was to be "engaged", and "the national economy [had] much riding on the outcome" of the "fray" with Iraq. The word "fray" carries a connotation of a minor skirmish, a short and noisy altercation over some trifle.
The "fray" has turned suddenly into something more of a long engagement involving the massive movement of many more troops, with a supply line stretching thousands of miles back to the continental US. The logistics of a prolonged Middle East war are a greater burden than the planners imagined. Ships were loaded with only enough food, ammunition and fuel for a raid. The troops were trained to accept masses of surrendering combatants. Soldiers were taught how to corral and keep hundreds and thousands of grateful and happy Iraqi's, who threw hugs and kisses to have their liberties restored.
Plans were for a quick victory, regardless of what dissemblance Rumsfeld and company display; in the original plan the logistics allowed for only a limited foray. Local lines of supply were to be used for the continuing needs of the civilian population, augmented by shipments of the UN oil-for-food program. Any items in short supply could be flown in from neighboring bases in Turkey, Kuwait and the UAE. The port facilities at Umm Qasr were to be available for docking shiploads of supplies for the people of southern Iraq, primarily concentrated in Basra.
The quick victory did not materialise, and all the aggregate costs of a longer war are being compounded with each passing day. It is not a "rolling start" type of war, as we are now being told. The entire enterprise must be halted for a rethink, and new plans prepared. The necessary planning is not just for increased personnel, machines and ammunition.
It is for the continuous supply of everything an army in the field requires, from toilet paper to tin snips, all of which must be delivered, stored and distributed in the harsh, hot conditions of a hostile desert. Supply dumps must be constructed, places where fuel, ammunition and spare parts can be accumulated. These supply areas become rich targets for the enemy, and must be protected, requiring additional troops. What you own, owns you.
Navy ships cannot remain on station indefinitely. They must return to home port for re-supply and necessary re-fit. Carrier groups devoted to a short tour must now be rotated with replacements. Transit time for large ships can be months each way, with additional time required for the in-port logistics activity.
The war in Iraq is now something more than a fray, and one must wonder when the leaders of the UK and Australia will see the hopelessness of proceeding with what is seen by everyone as a diplomatic, political, military and economic disaster. Nothing is to be expected from the US but a further dogged insistence that only complete domination and control by a US force will be satisfactory. They will continue until all the birds have fallen from the sky.
The url of this page is: https://harunrmy0.tripod.com/36PlanesDown.html