By David Bailey
CHICAGO, March 20 (Reuters) - Many large U.S. corporations said on Thursday they had banned all but essential travel to the Middle East and curtailed travel in the United States because of the Iraq war, another blow to the already struggling airline industry.
Some 21 percent of corporations in a Business Travel Coalition survey this week had banned all international travel and one-third of the rest were considering a ban. Nearly half restricted domestic business travel as well, adding to the historic travel downturn since the attacks of Sept. 11, 2001.
"Despite business travel demand that is already sharply down, terrorist threats against Americans and U.S. assets overseas and domestically are combining with war to drive near-term demand down further than many industry observers expected," the coalition said.
U.S corporations cut back travel sharply after Sept. 11 and business travel has never fully recovered, so airlines face a double whammy in the new wave of travel restrictions because of the Iraq war.
Major U.S. airlines have reported billions of dollars of losses in the last 18 months, driving two, United Airlines and US Airways Group Inc. , into bankruptcy protection and others including American Airlines parent AMR Corp. near the brink.
Desperate to convince travelers to continue flying, U.S. airlines are allowing passengers to change or cancel reservations without penalty. But the moves have not so far convinced business travelers, the most lucrative airline passenger segment, to keep flying.
It was very quiet at the American Airlines terminal at John F. Kennedy International Airport on Thursday.
"This is supposed to be the busiest period, right now it's the slowest," said Cheickh Gueye, general manager of the Sbarro restaurant at the American terminal. "There's nobody here."
Gueye said he'd noticed traffic falling off yesterday.
HIGH THREAT LIMITS TRAVEL
"We have limited travel to several countries, particularly to the Mideast and Asia and wherever else the threat has been deemed as extremely high," said Beth Dann, spokeswoman for Corning Inc. , the No. 1 maker of fiber optic cable.
Tyson Foods Inc. , the largest U.S. meat company, has restricted workers to critical travel for the next week, while Kraft Foods Inc. , the largest North American food company, requires senior management approval for some travel.
"What we're doing is that we're asking employees to restrict travel to essential travel -- necessary to sustain business operations," Kraft spokeswoman Kathy Knuth said.
As a result, airlines are expected to begin cutting back schedules where demand is weakest. United, a unit of UAL Corp. , has said an Iraq war may force capacity cuts of up to 12 percent and layoffs.
Continental Airlines Inc. announced schedule and job cuts earlier this week and on Thursday, American, a unit of AMR Corp. , the world's largest airline, called cuts in its international flight schedule likely.
Some companies are encouraging workers to use the Internet or satellite conference calls to replace travel, or have set up hotlines to let employees check travel risks before departing.
"We believe the travel risk can be managed and also refined by staying aware of what's going on in the part of the world you are going to," Ken Golden, a spokesman for farm equipment maker Deere & Co. , said Thursday.
Telecommunications equipment maker Lucent Technologies Inc. , based in Murray Hill, New Jersey, has restricted travel to the Middle East, but already had pared travel the past two years in cost-cutting efforts, spokesman Mary Lou Ambrus said.
Cost-cutting also severely limited nonessential travel for Ford Motor Co. and the Chrysler side of DaimlerChrysler AG before the war. (Reporting by David Bailey, Ben Klayman, Kim Dixon, Sue Kelly, Rachel Cohen, Deepa Babington, Deb Sherman, Bob Burgdorfer, Cal Mankowski, Tom Brown, Jessica Wohl, Deborah Cohen and Elinor Mills Abreu and Ilaina Jonas)