One year since 9/11, non-US airlines recover

12 September 2002

New York: The 11 September 2001 attacks in the US resulted in the crash landing of US airline industry, which had already been suffering from weak demand, low ticket prices and mounting debts, says Standard & Poor's (S&P) ratings services. But the European and Asian airlines were not affected in a major way.

According to an S&P study, dramatic falloffs in passenger revenue - linked to a soft economy and security concerns - hurt nearly every airline, and the effects spread to US airports. Some respite came in the form of federal support, but the problems were so deep that by August 2002 one major airline - US Airways - had filed for bankruptcy and another - United Air Lines - had threatened to do so soon.

US airports, however, managed to absorb the revenue shocks by raising the rates for parking and other concessionaires. Some, especially on the West Coast, were able to cut back on capital projects, or at least slow them down. Bouncing back sooner than expected, the airports' credit ratings did not suffer nearly as much as US airlines did.

Internationally, the attacks immediately slowed down air traffic particularly for flights to and from the US. Canadian airlines, although hurt severely following 9/11, have rebounded better during 2002, with Air Canada reaching profitability by the second quarter. Federal government aid, although more limited than that in the US, has provided war and terrorism liability insurance coverage.

Higher payable insurance premiums on repurchased coverage increased Canadian airline and airport cost bases. On the other hand European airlines tended to weather the short-term downturn well, with UK airports faring even better.

The Asia-Pacific region fared relatively better than the US. Despite very tough international markets and a fall in passenger numbers, very few ratings were downgraded. The collapse of Australia's second-largest airline, the Ansett group, two days after 9/11 had a dramatic effect on the fortunes of its owner, its key competitor, and - to a lesser extent - the nation's airports.