To the Fin de Siecle

The recession of the early 1990s began to abate toward the middle of the decade. And just as deregulation had produced the greatest losses in the history of the airline business just a few years before, now profits began to rebound under deregulation.

• In 1994, American Airlines saw the highest quarterly profit in its history and in the history of any airline since the beginning of commercial aviation.

• TWA emerged from Chapter 11 and restructured—with a 45 percent employee ownership.

• Northwest avoided bankruptcy with an employee trade-off of stock for concessions.

Beginning in 1995, the financial picture for most airlines markedly improved, and contin­ued to improve through the end of the decade. Net income for many airlines reached its peak that year as traffic figures spiraled upward in a continuation of a good economy and a cli­mate of stable wages and fuel prices. Each year from 1995 through 1999 were profitable ones for the airlines, reaching $5.6 billion that last year. Labor contracts were renegotiated, fleets were expanded, and employment rose. But there was trouble just over the horizon.

: Into the New Millennium

The airlines entered the new millennium riding the crest of the same wave that generally took the stock indices and corporate profits to their his­torical high point. The so-called dot. com computer and technological sector, now seen in context, pro­pelled an economic “bubble” that burst in the year 2000. That year a downturn began in the economy that produced concerns of a “bear” market, then turned to fears of a recession. Although passenger enplanements reached a then all-time high in 2000 of 693 million, the airlines, like everyone else, were now on the backside of the wave.

The year 2000 saw the end of six years of relative prosperity in the air carrier industry. The downturn in air carrier profits actually began in 1998 but it was not until 2001 that adversity took hold. As the year progressed, it was forecast that the industry, as a whole, would experience a loss of perhaps $3 billion. This projected loss was of a magnitude somewhat comparable to the early years of the 1990s, but less than either 1990 or 1992. While this projected loss was substantial, it was still within the bounds of the cyclical nature of the industry since deregulation.