carriers struggle to survive a 10% drop in demand and an increase in jet fuel, they brace themselves for the possible financial backlash of Operation Iraqi Freedom. There is no way to predict the war with Iraq will affect the air carriers. A short operation brings about different possibilities than that of a long war. With U.S. air carriers already expecting a 4-6% billion for 2003, many believe that the war with Iraq could cost the airlines an additional $4 billion per quarter. On Wall Street airline and hotel stocks are once again down. Fear that the war with Iraq may be more drawn out than thought is keeping people from traveling. All major carriers are coming under pressure on Wall Street. The airlines are asking for more relief from the U.S. government to help them survive.
Not all believe that the overall loss will be so bad. Some believe that it would be a surprise to see another 10% drop in traffic given the current situation and slow economy. Some see it as being beneficial for the airlines as long as it remains a short and successful war. Oil prices, currently 34% higher than last fall, would be reduced and more people would be more likely to travel. However, if the war is long or if there is a major terrorist attack, it could devastate the industry. The hardest hit by a long war would be international carriers.
The amount of stress put on European carriers due to the war with Iraq depends on the length of the war as well. The Assn. Of European Airlines and Airports Council International (ACI) are working with the European Union (EU) to work out a contingency plan. The ACI is asking the EU to set aside certain rules prohibiting state aid to air carriers. Furthermore, they are seeking government financing of new security measures imposed after 9/11. .
Terrorism insurance is one of the largest costs facing European air carriers. Insurance costs for International Air Transport Assn.