A day after falling 28 percent Monday in response to US Airways' bankruptcy filing, shares in UAL Corp. dropped an additional 95 cents to $2.85 in morning trading on the New York Stock Exchange. That is UAL's lowest level, adjusting for stock splits, since 1982.
Adding to airline woes, American Airlines, the world's largest air carrier, unveiled plans Tuesday to cut another 7 percent of its work force, reduce flights and retire aircraft as it tries to restore profits in the wake of the post-Sept. 11 downturn.
CBS News Correspondent Maureen Maher reports that the record $11 billion loss last year left many of the big name carriers crying for Federal Funds.
But David Stempler President of the Air Travelers Association has long warned airline executives "to get concessions from their employees and other cost reductions before they will give them the loan guarantee."
Right now, about the only airlines that are making money are the so-called "no-frills" carriers, like Southwest and Spirit.
Analysts say if the full-service airlines like American don't make these changes passengers may only end up with those cheap-seats to choose from.
"We're running high load factors, but at prices so low that it's just tough to make money - and the only way you can do that is to get your costs down," says Tim Doke, American Airlines spokesperson.
Respected industry analyst Sam Buttrick of UBS Warburg, while bullish on other airline stocks, called bankruptcy "increasingly difficult to avoid" for UAL.
He said company appears dependent on government-backed funding - a requested $1.8 billion federal loan guarantee - that he suggested may not be forthcoming because of stiff cost-cutting requirements by the Air Transport Stabilization Board.
Buttrick said that "in the increasingly likely event of a bankruptcy within the next six months (we) would expect the stock to migrate irregularly towards zero."
United spokesman Joe Hopkins said the airline had no comment on either American's new plan or the analyst's downgrade.
United had implemented a financial recovery plan to stem losses from the Sept. 11 terrorist attacks, but the nation's No. 2 carrier faces several obstacles along its road to recovery, including high labor costs and losses of more than $1 million a day.
Even before Monday and Tuesday's drop in stock prices, shares of United parent UAL Corp. had already had lost more than half their value since the start of July. They traded at $35 a year ago.
United officials have declined to discuss the prospects of a Chapter 11 filing. But interim CEO Jack Creighton told United employees Sunday that the government appears likely to reject the application for the $1.8 billion loan guarantee unless there is more progress in cutting costs.
United's pilots have agreed to conditional wage cuts as part of the financial recovery plan, but mechanics and flight attendants have not. The airline says the agreements are crucial to cutting costs.
Even the loan guarantee would not ensure that United can avoid bankruptcy, not after losing a record $2.1 billion last year and an additional $851 million during the first six months of 2002.
The situation isn't entirely bleak for United. It has more than $2 billion in cash reserves, more aircraft than US Airways and a superior route system.
American's actions, which include 7,000 job cuts, are the latest in a series of moves by American to right itself as air travel remains depressed, particularly among high-paying business fliers.
The Dallas/Fort Worth-based airline will change the seating plans on nearly 100 jets -- Boeing 777s and 767-300s -- to better match demand for various classes of tickets.
It also plans to smooth out the flight schedule at its key Dallas/Fort Worth hub to distribute flight times more evenly throughout the day. A similar move at its Chicago hub earlier this year reduced the need for five aircraft there by using others more efficiently.
In all, the changes will save about $1.1 billion annually, American said, roughly equivalent to the amount of money the giant airline lost in just the first six months of this year. In 2001, American parent AMR Corp. lost $1.8 billion.
Most job cuts will begin in October and will be widespread across the system, an American executive said. About 40 percent will come from the ranks of pilots and flight attendants. The job cuts will be complete by March 2003.
No cuts are expected on the maintenance and engineering side, said American spokesman Tim Doke. As of March, American had 101,706 employees.