"Divided Airlines Struggle To Lobby With One Voice"

Thursday, April 3, 2003                         

Divided Airlines Struggle To Lobby With One Voice
Behind the Façade, Disputes Range From Executive Pay to Time Frame for
Bailout
By STEPHEN POWER 
THE WALL STREET JOURNAL


WASHINGTON -- As the nation's airlines lobby Congress for another federal
handout, they are working hard to conceal divisions among themselves over
how Washington should help.

Bargain carriers that structure executive pay differently than big airlines
grumble that a flap over compensation at Delta Air Lines is likely to saddle
them with caps tied to base pay in 2002 that could have a disproportionate
impact on their ability to recruit and keep talent. Cash-starved airlines
are pushing for quick reimbursement of security fees paid to the government.
Others probably would embrace a suspension of future security fees and a
federal commitment to pay for security measures mandated after Sept. 11,
2001, such as the screening of catered food and employees with aircraft
access.

Complicating the industry's agenda, union leaders insist that any
airline-relief measure contain extra unemployment insurance for laid-off
airline workers who have exhausted jobless benefits or are close to doing
so.

The war in Iraq also is taking toll: A dropoff in bookings is expected to
add $4 billion or more of red ink to the $6 billion previously projected for
this year. With the Bush administration reluctant to get involved, the
carriers are pinning their hopes on Congress, where many lawmakers don't
want to be seen as failing to bolster such a vital industry. (See related
article)

A big test of the industry's unity looms. The House and Senate are expected
to vote Thursday on bills funding President Bush's request for $74.7 billion
in wartime spending, which tack on upward of $3 billion for airlines. The
industry's main lobbying group, the Air Transport Association, hasn't
publicly stated its preference for the House or Senate version. Differences
between the two will be worked out in a conference committee next week.

White House spokesman Ari Fleischer criticized both airline-aid packages as
"excessive." Mr. Fleischer said the administration "does not oppose some
assistance for the airlines," but it should cover costs incurred "as a
result of the war, not as a result of previous existing factors in the
economy." Senate Majority Leader Bill Frist, a Tennessee Republican,
predicted Congress "is going to speak pretty loudly" on airline aid. "I
would hope the president would accept" what lawmakers come up with, he said.

But a senior administration official said the White House was talking with
congressional allies about possibly sponsoring floor amendments that cut the
aid package's overall costs.

Some airlines, including UAL Corp.'s United Airlines, which sought
bankruptcy protection in December, are pushing for the House version,
because it would deliver cash more quickly than the Senate bill, industry
lobbyists said. But lobbyists are trying hard to keep a unified front.
"We're being very careful to approach this in an evenhanded way, so as not
to help disproportionately any one airline or group of airlines," a lobbyist
for one major carrier said.

The House's airline package contains $3.2 billion to offset security fees,
but nothing for laid-off workers. The Senate version contains $3.5 billion
in aid, roughly $1 billion of which would pay for hardening cockpit doors
and other security mandates, but airlines wouldn't be reimbursed for making
those improvements until Transportation Department officials verified that
the work had been done. The remainder would include a suspension of security
fees for six months -- worth another $1 billion -- an extension of
government "war risk" insurance, unemployment insurance for laid-off workers
and money for airports to pay for their own security costs.

Disagreements within the industry extend to strategy. Less than a week after
the start of the war, several major carriers, such as United and AMR Corp.'s
American Airlines, dispatched dozens of uniformed employees to Washington to
lobby lawmakers for help. But another major carrier, Delta, opted to sit
out, concluding that the tactic was "unseemly," an industry official
familiar with the matter said. A Delta spokeswoman said the airline simply
chose a different strategy, in which employees were encouraged to call or
write their congressional representatives.

Tensions also are apparent in the way carriers have responded to the furor
over executive pay at Delta. The Atlanta-based airline, which posted a loss
of $1.27 billion last year, paid Chief Executive Leo Mullin a salary and
bonus of $2.2 million plus stock options and restricted stock valued at
$10.2 million. The company's moves angered lawmakers, who added provisions
to their relief packages limiting total executive compensation to 2002 base
pay-and benefits, in the case of the House bill, which a Democratic aide
said includes items such as health care but not options or bonuses. The
Senate version, which wasn't available Wednesday, would limit executive
compensation to 2002 "salaries," according to industry lobbyists familiar
with the matter.

Low-fare rivals such as Air-Tran Holdings Inc. of Orlando, Fla., said their
top executives' pay would be cut by more than half under such provisions,
because so much of their pay is tied to performance. In 2001, for example,
AirTran Chief Executive Joseph Leonard's base pay was $348,000, but his
bonus was $510,000.

"It would be in effect penalizing the low-fare carriers...for the excesses
of Delta and others," says Richard P. Magurno, AirTran's senior vice
president and general counsel.

As in past campaigns for federal aid, the airlines are looking to their
workers for help in lobbying lawmakers directly. But the unions' interests
don't neatly overlap with industry's.

The AFL-CIO backs the Senate relief package, which contains $225 million to
fund unemployment insurance for laid-off airline workers. But the airlines
aren't campaigning for it, and some Republican congressional aides said the
provision could erode Republican support for the overall package.

The unions also remain wary of the industry's separate campaign for changes
in federal labor law that would limit workers' right to strike. During a
recent industry conference here, the executive director of the AFL-CIO's
Transportation Trades Department, Edward Wytkind, demanded that American Air
and United Air lobbyists, seated just a few feet away, agree to cease
lobbying for changes in the Railway Labor Act, which governs airline-labor
negotiations.

American's lobbyist said the airline wasn't pressing that point, but Mr.
Wytkind wasn't reassured. "You can't get along part of the time and then,
when times are good, go to Capitol Hill and make very dangerous changes in
labor laws," he said.


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