Sabena goes bust and thousands more jobs cut as air crisis deepens

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Crisis highlights lack of rights for air passengers

Slashed services, job cuts and falling shares: The airline industry in crisis

The crisis engulfing the world airline industry deepened yesterday after a second European carrier filed for bankruptcy protection, thousands more jobs were cut and British Airways revealed that bookings were down by as much as 30 per cent.

The Belgian government stepped in with an emergency aid package of £125m (£80m) for its flag-carrier, Sabena, after the airline announced it was seeking protection from its creditors. The Swiss government followed suit, pumping $280m (£190m) into Swissair to enable the airline to resume flights today after its collapse on Tuesday. But Swissair shares lost 98 per cent of their value after coming back from suspension, rendering it almost worthless.

BMI British Midland, the UK's second biggest scheduled airline, said it was cutting 600 jobs from its workforce of 5,500, reducing capacity by 20 per cent and grounding eight aircraft. The chairman, Sir Michael Bishop, said there had been an "earthquake" in the airline industry from which some carriers might never recover.

General Electric, the world's biggest aircraft-engine maker, said it was cutting 4,000 jobs, or 13 per cent of the workforce, in its aero division, because of the collapse in orders.

BA meanwhile released the first figures revealing the extent of the collapse in air travel since the terrorist attacks on America. Traffic levels for September fell 22 per cent overall. In the first week after the attacks traffic was down by 36 per cent but by the last week of September it had recovered to be 28 per cent down.

However, traffic on BA's north Atlantic routes was down by 40 per cent last week. Forward bookings for this month indicate traffic levels across the BA network will be down by 25-30 per cent.

A BA spokesman warned that further job losses could not be ruled out on top of the 7,000 redundancies announced last week. "We have made our initial adjustments to capacity and costs on the basis of what we can see but if the world changes dramatically all of that will be revisited," he added.

The airline said insurance and security costs would rise "significantly" this year but these would be partially offset by a £50m reduction in its fuel bill because of falling oil prices and reduced services. BA is operating 190 fewer flights a week.

Belgium's Prime Minister, Guy Verhofstadt, described the £125m payment to Sabena as a loan "to create a new airline", although 2,000 jobs, including those of 220 pilots will go as part of the accompanying rescue plan. The payment will enable Sabena to operate flights as usual after Swissair, which owns 49 per cent of the Belgian carrier, withheld the first £132m instalment of a £430m refinancing package.

KLM, the Dutch carrier, is due to announce fresh capacity and job reductions today while the New Zealand government is expected to announce it is rescuing its national carrier, Air New Zealand, by taking a stake in the airline and injecting up to NZ$1bn (£280m).