3 Major Airlines Try to Fly Above Financial Failure

United Airlines has been in bankruptcy protection for nearly two years. The carrier is planning to cut more jobs and is examining the possibility of eliminating four of its employee pension plans. (M. Spencer Green -- AP)

Three of the nation's largest airlines could be operating under bankruptcy protection in coming weeks, analysts say, the latest sign of the industry's upheaval as it lurches through a historic transformation.

United Airlines already is in bankruptcy. US Airways has warned for months that its second bankruptcy filing in two years could come as soon as this month. And Delta Air Lines, which is struggling to lower costs, looks increasingly like a candidate for Chapter 11.

All three airlines are locked in contentious talks with employees in a bid to lower costs by reducing pay and benefits or eliminating jobs outright. The failure to win concessions from workers not only could hurl the airlines into bankruptcy, it also could precipitate their demise, industry observers say. The chairman of US Airways, David G. Bronner, has warned that a trip into bankruptcy may be a dead end resulting in the company's liquidation.

Simultaneous bankruptcies, which would cover 42 percent of the nation's flights, could force the industry to accelerate its overhaul, leading to drastic cutbacks for workers and a sharp reduction in the number of seats available to travelers.

"Today, you have an entire industry that has been subjected to a paradigm shift by the virtue of new [low-cost] carriers," said Robert L. Crandall, former chief executive of American Airlines. "The outcome in the end will be that every carrier, in one way or another, is going to have to get their costs down to the point where they are essentially the same as low-cost carriers. That means [get] rid of fixed-benefit pension plans, completely and profoundly change their labor contracts, eliminate restrictive work rules, and reduce wage rates."

A triple bankruptcy hasn't hit the industry since 1992, when Continental Airlines, Trans World Airlines and America West Airlines were all in Chapter 11. At the time, the industry was stronger than it is now, and the bankrupt carriers affected only 19 percent of the country's airline operations, according to J.P. Morgan Chase & Co. analyst Jamie Baker. Continental, America West and TWA all emerged, though TWA eventually folded in 2001.

This time, the stakes are larger. The industry is at a turning point. The growth of low-cost carriers and high fuel prices threaten the survival of the traditional airlines. Even in a strong economy, the major airlines would be unable to raise prices much because the low-fare carriers and the Internet have changed the fare game.

The industry's restructuring began after the Sept. 11, 2001, terrorist attacks, when travel fell off and the airlines were forced to cut about 100,000 jobs and seek billions of dollars in aid from the government. But the carriers failed to take drastic enough steps to forestall continued turmoil even as passengers returned.

The struggle to emerge from bankruptcy, or avoid a slide into it, preoccupies United, US Airways and Delta. United's reorganization under bankruptcy protection has dragged on for nearly two years. Its executives are expected to release details of its restructuring later this month. It is likely to include job cuts and a squeeze on pay and benefits to trim costs enough to attract the $2 billion in financing needed to emerge from bankruptcy.

United spokeswoman Jean Medina said yesterday that the airline may have to reduce its workforce as part of its overall plan to rein in costs.