Airlines: Flying Low

Just when Americans were starting to calm down about air travel, Subash Gurung decided to fly from Chicago to Omaha, Neb. The jobless Nepalese man, here on an expired visa, got through security at O'Hare airport last week with five knives, a stun gun and a container marked TEAR GAS/PEPPER SPRAY. After a search at the gate uncovered the weapons, Gurung was arrested but soon released on bond. He was taken into custody only when he returned to O'Hare to pick up another bag, filled with more knives. And in the story's grim punch line, two of the seized knives were later stolen from an open box at the checkpoint, and two security workers were fired in connection with their disappearance. Sit back, relax, and enjoy the flight.

Even before Sept. 11, the airline industry was in trouble. The weak economy was cutting sharply into business travel, whose high-margin tickets account for nearly 80% of industry profits. Costs were skyrocketing, pushed by labor contracts negotiated in flush times. And now travelers, worried about security and wary of delays and hassles at airports, are looking for any excuse not to fly. Upshot: airlines have cut flights 20% from pre-Sept. 11 levels, yet planes still flying are at just 65% of capacity, compared with an estimated 73% before the terror attacks.

Throughout the airline industry these days, red ink is pouring the way champagne once did in first class. United is leading the way down, losing $15 million a day and warning last month it would "perish" without a cash infusion. Even with the government's $15 billion post-Sept. 11 bailout, industry watchers are predicting a shakeout that could ground some big carriers permanently. "It's a horrible picture," says ABN AMRO airline analyst Ray Neidl. "And the fourth quarter will be uglier than the third."

When things go bad at this time of year, they go very bad. Airlines depend on the holidays, slogging through cheerless Octobers, waiting for the full planes, and often full fares, of Thanksgiving and Christmas. But this season, Americans are more reluctant to fly than at any time in recent memory. Would-be flyers are worried not only about security, delays and possible strandings; some also wonder whether the airline they've paid for a Christmas ticket will be in business when it comes time to depart. Here are some of the questions travelers are asking:

HAVE NEW SECURITY MEASURES MADE IT SAFER TO FLY?

As we're constantly reminded, statistically, the drive to the airport is more dangerous than the flight, even when the hijackings of Sept. 11 are factored into the odds. Travel professionals say they have clients who don't want to fly, but even more who are worried about being stranded far from home if the air-traffic system shuts down for days, as it did after Sept. 11. And others don't want to endure long lines at check-in and security.

To be sure, security has improved. Last week the airlines finished installing bars on cockpit doors to keep passengers from assaulting the pilots, as the hijackers did. And President Bush announced last week a 25% increase in National Guard troops, to a total of 9,000, who will be stationed at the country's 420 airports.