"Congress OKs emergency airline aid"

Thursday, April 3, 2003

Congress OKs emergency airline aid
White House will seek to trim $3 billion price tag in conference
By Susan Cornwell And John Crawley
Reuters


WASHINGTON, — Despite White House objections, the U.S. Congress on Thursday
night approved more than $3 billion in aid for airlines still reeling after
the Sept. 11 attacks and facing more losses due to war in Iraq. A $3.2
billion plan in the House of Representatives and a $3.5 billion proposal in
the Senate cleared the respective chambers easily as components of separate
legislation for Iraq war spending.

   THE BUSH ADMINISTRATION called the price tag of each plan excessive, and
was expected to push its views on negotiators from each house who will now
decide the scope of assistance.

  “We’ll work together to arrive at a good solution in conference,” said
White House spokesman Ari Fleischer. Those negotiations will begin next
week.

  Key Bush administration officials say struggling airlines should cut more
costs and further restructure their operations, rather than seek government
help.

  The nation’s major airlines have appealed to the government for a second
round of blockbuster assistance since the 2001 hijack attacks transformed an
industry slowdown into the worst-ever downturn.

  Congress granted airlines a $15 billion bailout to offset losses caused by
the attacks.

  Last month, the biggest carriers sought relief from taxes and fees as well
as help with meeting insurance premiums and security costs. They said
without help, war in Iraq could drive 2003 losses to nearly $11 billion.

  But the White House said claims of a financial catastrophe due war have
not materialized. The industry countered that assessment with figures
showing a sharp drop in traffic last week and dire projections for April.

  Despite intense lobbying from politically powerful airlines, the White
House had some allies on Capitol Hill.

  “We are creating, unless we change this process, an Amtrak in the air,”
warned Arizona Republican Rep. Jeff Flake, referring to the money-losing
passenger railroad that depends on government funding for its survival.

FINANCIAL PROBLEMS

  But Flake withdrew a proposal to pare the House package by more than $2
billion after extracting a promise from the Republican leadership to
promptly take a closer look at the industry’s systematic financial problems.

  Kentucky Republican Rep. Anne Northup said administration officials
indicated to her that they favored spending roughly $900 million in airline
aid now. But the congressional leadership wanted to do more.

  House Speaker Dennis Hastert told reporters the White House could “second
guess” the plan he helped draft, but noted the administration never made an
aid proposal in the first place.

  “It’s just getting them through this tough time, that we don’t have a
whole industry collapse at a time when maybe we need it most,” Hastert said.

  Both chambers have made part or all of the aid conditional on limiting the
pay of top airline executives. Some lawmakers were irate when it was
disclosed that airline chief executives collected millions of dollars in
compensation in 2002 while cutting thousands of jobs and flights.

  But Delta Air Lines chief executive Leo Mullin, one of the best paid in
the industry, said before the congressional votes on Thursday that he would
voluntarily cut his projected compensation for 2003 by roughly $9 million,
according to an internal company memo obtained by Reuters.

  While the two plans offered roughly the same amount in aid, they were
structured differently and negotiators will have to sort out what type of
help to give.

  For instance, both plans would suspend certain fees for aviation security
for six months, saving the carriers $900 million. But the House offers a
retroactive fee reimbursement to significantly boost the amount of money
each airline would receive.

 Hastert represents Illinois, the home of bankrupt United Airlines, which
desperately needs cash. The House plan would better suit that company’s
needs than the Senate proposal, which limits liquidity.

  A big-ticket component of the Senate package would freeze premiums for
high-end liability insurance, extend unemployment benefits for out-of-work
airline employees, and reimburse airports for some security expenses.

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