18 September 2001

U.S. Airlines Asks White House, Congress for Assistance

By Andrzej Zwaniecki
Washington File Staff Writer

Washington - The Bush administration is working closely with Congress to craft a rescue package to support the U.S. air transportation industry, which has been experiencing unprecedented financial woes since the September 11 terrorist attacks.

According to news sources, airlines have already lost $1,000 million in revenues and continue to lose between $250 million and $300 million a day as a result of the shutdown of the nation's air system, the implementation of new security measures, and weakened demand.

Even before the terrorist attacks the U.S. airlines were struggling with heavy debt burdens, rising fuel and labor costs and a decrease in business travel. But the fallout of the terrorist attacks has dramatically deepened their financial difficulties.

White House Press Secretary Ari Fleisher said September 17 that President Bush was very "concerned about the health of the airline industry." And Transportation Secretary Norman Mineta, following a September 18 White House meeting, told reporters that he hoped to deliver financial rescue proposals to Congress by early next week. Earlier in the day, he consulted with six airline executives and the ATA president on rescue options.

Trying to shore up loses, several airlines announced plans to reduce service by an average of 20 percent and make job cuts ranging from 1,500 to 11,000. The Air Transport Association (ATA), an industry group, said that more layoffs are likely in coming weeks. While some of the layoffs are considered temporary, the industry is not hopeful that many of these jobs will be reinstated in the near future.

Investors seem to share the bleak view of airlines' financial prospects. When the New York Stock Exchange reopened September 17, after a four-day break, shares in five major carriers fell between 40 and 52 percent. The Standard and Poor's Airlines Index, which tracks U.S. airlines, plummeted more than 30 percent.

The airline industry faced with a deepening crisis decided to ask the government for help. U.S. airlines want between $20,000 million and $24,000 million in loan guarantees backed by the federal government, tax relief, and direct cash assistance to stabilize their finances, said ATA.

The House of Representatives considered September 14 a bill that would provide $15,000 million in grants and credits to financially strained airlines. A supporter of the bill, Congressman James Oberstar, a member of the House Transportation and Infrastructure Committee, said that without assistance the industry could be in complete financial liquidation within a week or two, and that the effects of such a failure would ripple through the whole economy.

But other representatives, concerned about moving too fast, won the postponement of the effort. Congressman Paul Kanjorski, a member of the House Financial Services Committee, said that airlines were not the only industry that suffered as a result of the terrorist attacks, and that the House might include banking, insurance, and other industries in any financial rescue package. Kanjorski also said the bill should compensate the airline industry for losses without creating a new entitlement program or interfering with competition.

Action in the Senate is less certain. In a September 15 statement, Senate Commerce Committee Chairman Fritz Hollings noted that before the September 11 attack, airlines were claiming insolvency while, at the same time, giving their executives $120 million in salaries and bonuses. He said he would be willing to consider compensation for airlines if they gave up monopolistic control of the nation's hub airports.