Pilots offer pay cuts as gloom hits airlines

Pilots at American Airlines, the world's largest carrier, offered a £660m (£410m) package of pay cuts yesterday in an effort to avert bankruptcy.

A union representing 13,500 pilots said it was prepared to sign up to changes in working conditions and to across-the-board pay-rate reductions.

American Airlines would be the latest victim of an industry crisis triggered by the war with Iraq, surging oil prices and slumping share prices.

The proposal from the pilots' union follows tentative deals offered by other unions. The 26,000-strong flight attendants' union offered $340m of concessions on Friday which the union says meets management's cost-savings targets.

A pact still must be reached with 16,200 mechanics represented by the Transport Workers Union, which warned that bankruptcy would lead to a further $500m of cuts. On Saturday, the TWU said it had reached tentative deals for five of its eight working groups.

The airline has said it needs to cut costs by about $4bn a year to avoid bankruptcy. It wants its unions to accept $1.8bn in wage concessions. It could still file for bankruptcy – the largest in global aviation history – as soon as next week, according to banking sources.

United Airlines and US Airways are already in bankruptcy and all major US carriers have implemented savage cuts, prompting fears the industry might be on the verge of extinction.

Domestic flight bookings have fallen 20 per cent since war broke out while demand for transatlantic travel has slumped 40 per cent.

Similar gloom has hit this side of the Atlantic. Last week, British Airways cut capacity and brought forward 3,000 job cuts. It is in danger of falling back into the red this year.

Ulrich Schulte-Strathaus, secretary general of the Association of European Airlines, called on governments yesterday to guarantee to underwrite extra costs caused by war. He said passenger traffic had dipped significantly in the first week of fighting.

Crisis means cheaper flights

Dramatically reduced demand for flights because of the war in Iraq is forcing airlines to grant unprecedented flexibility to their passengers.

At least 22 companies, including the big transatlantic carriers British Airways and Virgin Atlantic, have introduced new ticketing arrangements which abolish fines for passengers changing their travel plans at the last minute. A British Airways spokeswoman said it made sense to give customers more flexibility.

Airlines which have introduced free changes to tickets include British Airways, United, Virgin Atlantic, KLM, Emirates, Kuwait Airways, Qatar Airways, Turkish Airways, Malaysian, Royal Jordanian, Gulf Air, Alitalia, American, Singapore Airlines, Air France, Continental, Lufthansa, Air Canada, Malev, US Airways, Swiss and Scandinavian.