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Starting over

National | Layoffs may prompt an entrepreneurial surge, America West gasps for air, and toll-free phone service ebbs

Issue: "Fighting words," Jan. 12, 2002

New and improved
Marc DallaCosta is out of a job. Boeing laid him off last month along with more than 15,000 others at the aerospace giant. Mr. DallaCosta, a nine-year Boeing employee who worked in Seattle, hopes to "get a job quickly" but notes realistically that "it won't be around here." He may be right. Sweeping layoffs likely will continue into the second quarter of 2002, according to Bernadette Kenny of the global outplacement firm Lee Hecht Harrison. Ms. Kenny said several of her company's corporate clients have already given "the heads up" that more cuts are on the way. But as the nation rides out the unemployment storm, silver linings could appear. Continuing layoffs may spark an entrepreneurial boom like the one that followed the last major U.S. recession in 1991, said John Challenger, CEO of the international outplacement firm Challenger, Gray and Christmas. From 1989 to 1992, nearly 17 percent of jobless executives and managers started their own firms, Mr. Challenger said. As the economy soared during the 1990s, though, lavish salary and benefit packages seemed to reduce the number of hungry innovators. The rate of jobless managers and executives starting their own firms fell to 11 percent between 1992 and 1996, then to just 7 percent through the start of the new millennium. Now that corporate perks are out and penny-pinching is in, unemployed workers may once again have to take charge of their own employment. But businesses they start, Mr. Challenger said, will probably not resemble the hastily launched enterprises of the dot-com era: "Growth will be more controlled and business plans and objectives clearly mapped out." Gasping for air
Despite ferrying more air travelers since Sept. 11 than any other airline, the future of the nation's eighth largest carrier is up in the air. Tempe, Ariz.-based America West last week received conditional approval for $380 million in loan guarantees under a $10 billion package passed by Congress after the Sept. 11 terrorists attacks. Prior to that approval, the carrier teetered on the brink of bankruptcy. But company executives and some analysts remain optimistic that America West can recover, given improving passenger loads and recent financial performance. "They are going to be operating in a tougher airline environment, but they have improved their operations; they've reduced their costs; and they have a turnaround plan," said Ray Neidl, an airline analyst with ABM AMRO in New York. America West first filed for bankruptcy protection in 1991, plagued by declining passengers loads, labor disputes, and maintenance and on-time problems. Many analysts believe the airline would have pulled out of its decade-long dive had the 9/11 attacks not slammed the air travel industry. A $200 million loan America West negotiated before the hijackings fell apart soon after them, forcing the company to lay off 2,000 employees. Despite analysts' current optimism over the company's prospects, concerns linger over the airline's spotty history. To obtain the loan guarantees, America West and its creditors had to cancel pay raises and bonuses, and agree to give the government a 33 percent equity stake in the company. Breaking free of toll-free
Fed up with labyrinthine voice-response menus and eons spent on hold, consumers are abandoning toll-free telephone numbers and flocking to the Internet for basic customer service. The trend threatens toll-free telephone service providers, according to a new study by Frost & Sullivan, a marketing research firm. Residential Internet usage has increased from 26 percent in 1999 to 41 percent in 2000, according to the report. Many consumers now rely on the Web for product research, bill payments, and to communicate with customer service representatives via e-mail. Further, since e-commerce has evolved from novel to normal, an increasing number of users make online purchases without live agents or toll-free customer support. Though most blue-chip telecoms are diversified enough to weather the decline in consumer use of toll-free services, the trend is cutting deeper at firms like Excel and Qwest/LCI, telephone-centric firms originally launched to cash in on the long-distance rate wars. But Frost & Sullivan analyst Stephanie Atkinson said firms offering toll-free services can make up ground by pressing more e-commerce firms to list toll-free numbers for those customers who still prefer talking to humans.

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