accounting for interim reports
Introduction
September 11, 2001 will always be considered a turning point in the history of
America. Terrorist’s attacks in New York City and Washington D.C. with aircrafts were proved to be a major catastrophe for American as well as world airline industry. The North American airspace was completely shut down for four days, and the airline industry faced an unprecedented decline in demand for air travel immediately after the attack.
As a result, the airline companies started facing deterioration in their financial positions and the number of flights. The current market for airline industry hasn’t fully recovered since that time. It is hard for airlines to balance their finance and get profits at this moment. The aim of this paper is to explore the financial and economic impact of September 11 from the aspect of airline and airports.
Airports
Airlines and airports seem to be an integral part of each other. Therefore, the airline activity strategies may directly implicate the airport operation. There was increased load on the airports due to increase in security measures.
As we know, the higher security cost has already been added to airport operation process.
Who should pay for the extra airport costs and what is the implementation for airports in the next coming years is a concern for many.
Airports, contrary to popular misconception, are not funded by government
general fund tax dollars. Rather, airports are funded either directly or indirectly out of
aviation revenue generated by airlines, their passengers, or airport vendors in the form of
direct payments or through earmarked taxes collected from aviation system users.
Airports rely on a variety of public and private funding sources to finance their capital development, including airport bonds, federal and state grants, passenger facility charges (PFCs), and airport-generated income. The decline in travel which followed 9/11 attacks resulted significant losses to the airports system. The major response to these declines were workforce cuts, and declined
Airlines
The airline industry is one of the adversely impacted industries by the September 11, 2001 tragedy. Just after the attack, nation’s aviation system was shut down and produced a cash “burn rate’ for the industry in excess of $330 million per day for the duration of the stoppage. It has been estimated that just in the first week after the tragedy the US airline industry lost between $1 to 2 billion .
Not all economic impacts on the airlines have been negative, however. The industry is extremely capital intensive, its two largest costs being airplanes and fuel. Deferrals on airplane orders, the retirement of older and less fuel-efficient planes, and a tremendous drop in global fuel prices have dramatically cut costs. Though labor costs represent a small portion of overall airline costs, slashing the workforce also cut airline expenses.
So far, over 300 airlines have collected nearly $4 billion in help money. The lion's share has gone to industry giants United, American, and Delta. Also, Congress passed a new tax break [next page]