A New Epidemic: Financial Sars

Now to the airline industry, which, like steel, is weak enough to succumb to SARS. Airlines have been battling a horrendous headwind of the recession, spooked travelers since 9-11 and low-priced competition. That makes the big airlines (other than Southwest) vulnerable. USAir's recent emergence from bankruptcy with lower labor costs and redone airplane leases--and United's trip into Chapter 11--have pushed other big airlines closer to bankruptcy or forced bankruptcy-like givebacks from labor, airplane lessors and creditors.

Still, restructuring doesn't guarantee success. It is "a process, not a solution," says Bethlehem chairman Robert S. (Steve) Miller, veteran of half a dozen bankruptcies and restructurings. "USAir still has to compete with Southwest, and U.S. Steel has to face up to the fact that Nucor [the nation's biggest minimill company] gives them fits."

And the rest of us have to face up to the fact that Severe Asset Restructuring Syndrome is part of the landscape. Someday regular SARS will recede. But financial SARS is a cost of living in a competitive capitalist country. If you want cheap flights, cheap steel and cheap phone calls, someone has to pay the price.

SLOAN IS NEWSWEEK'S WALL STREET EDITOR. HIS E-MAIL IS SLOAN@PANIX.COM.

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