"House and Senate Panels Back $3 Billion in Aid to U.S. Airlines"

Wednesday, April 2, 2003

House and Senate Panels Back $3 Billion in Aid to Airlines
By EDMUND L. ANDREWS
The New York (NY) Times

 
WASHINGTON, - The appropriations committees in the House and the Senate each
voted today to give the airline industry about $3 billion in emergency
assistance, enough to provide modest relief but nowhere near the amount
needed to cure the industry's most acute problems.

"You cannot call this a bailout," said Representative Tom DeLay of Texas,
the House majority leader. "I believe the industry needs to work through
their market problems on their own."

The House and Senate measures have significant differences, which will
ultimately have to be resolved in a conference committee. But both would
compensate airlines for additional security costs and both would impose
limits on salaries and bonuses paid to airline chief executives.

Administration officials vowed to push for a smaller package in the
conference committee. "A considerable gulf remains between Congress and the
administration regarding the amount and structure of this assistance,"
Norman Y. Mineta, the secretary of transportation, said.

Both measures were attached to bills to provide more than $75 billion to
cover costs tied to the war in Iraq, which Congressional leaders want to
pass before April 11, when the Congressional spring break begins.

White House officials originally opposed any additional money for airlines,
saying that the industry's problems stemmed from overcapacity and high costs
rather than from the war against Iraq. But administration officials have
made clear that they will agree to at least some money, if only to ensure
quick approval of money for the war.

Even so, analysts say the airline assistance pales in comparison to the
problems of major air carriers like United Airlines, which is in bankruptcy
proceedings, and American Airlines, which narrowly avoided bankruptcy on
Monday by obtaining wage concessions from labor.

The Air Transport Association, an industry group, estimated that airlines
were on track to lose nearly $7 billion this year and that the war in Iraq
would probably increase those losses another $4 billion.

Passenger numbers dropped about 10 percent in the week the war began.
Executives worry that anxiety about terrorist reprisals could depress
revenue for some time to come. Despite those problems, the airlines received
grudging sympathy, at best, here. Republican and Democratic lawmakers alike
said the airlines' biggest problems were of their own making.

Among the criticisms: the big hub-and-spoke carriers like United, American,
Delta Air Lines and Northwest Airlines failed to reduce their capacity
enough; failed to control their labor costs; and wasted money long before
the terrorist attacks of Sept. 11, 2001, by buying back their own shares at
what turned out to be inflated prices.

Adding insult to injury, some say, airlines like Delta awarded their chief
executives generous bonuses at the same time they were losing money and
cutting jobs.

"A lot of mistakes have been made by the industry," said Senator Trent Lott,
Republican of Mississippi, who helped write the Senate's airline proposal.
"I think they made bad management decisions, and they had a terrible record
of caving into labor unions."

The hostility was bipartisan. 

"This is a let's-pretend industry," said Representative David Obey of
Wisconsin, the ranking Democrat on the House Appropriations Committee. "They
pretend they operate in the free market and they pretend they are standing
on their own two feet. And then every couple of years they come to
Washington and ask for dollars to help them out."

The House plan would provide about $3.2 billion in assistance. It would
reimburse airlines for some of the security fees that passengers have been
paying since February 2002. The Senate plan would provide about $3.5 billion
over all. About $2.8 billion of that would go to extend the government's
program of subsidized war-risk insurance; it would also relieve passengers
from paying some of the additional security fees; and it would reimburse
airlines for about $900 million for new security requirements like fortified
cockpit doors.

But the biggest difference between the House and Senate plans is that Senate
Republicans agreed to incorporate part of a proposal by Senator Patty
Murray, Democrat of Washington, to provide additional unemployment benefits
for laid-off airline workers and extra money to airports and airlines for
security improvements. Those items brought the Senate plan's cost to $3.5
billion.

Regardless of the final details, Republican leaders in both chambers appear
set on passing slightly more than $3 billion in assistance. That is much
less than the $15 billion in aid to airlines that Congress passed shortly
after Sept. 11, 2001.

It is also less than the airlines wanted. Earlier this year, the Air
Transport Association suggested reimbursing airlines for about $4 billion in
added security costs and perhaps giving them a one-year holiday from $9
billion in ticket fees and taxes that now go into a federal fund for airport
infrastructure and operations.

But the airlines were reluctant to ask for big loan guarantees under the Air
Transportation Stabilization Board, which Congress authorized to provide as
much as $10 billion in loan guarantees to airlines reeling from Sept. 11.

Airline executives would prefer to receive tax relief or reimbursement for
security costs that they would not have to pay back.


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