Tags: Airline | Bailout | Hearings | Reveal | Few | Cracks

Airline Bailout Hearings Reveal a Few Cracks

Wednesday, 19 September 2001 12:00 AM

The airline industry is asking Congress for $17.5 billion in tax dollars to make up for a wide range of financial troubles stemming from the September 11 terrorist attacks on New York and Washington, D.C., including an ongoing drop in ticket sales, cutbacks in flight schedules, rising insurance premiums, and looming legal liability.

Five billion dollars of the requested amount would be in cash to address immediate shortfalls, while $12.5 billion would come in the form of loan guarantees.

The airlines are also asking for regulatory relief from both antitrust and labor laws in order to coordinate their efforts towards financial recovery and lay off workers without the usual costs associated with collective bargaining agreements.

Some members of the committee grilled executives from Delta, Alaska Airlines, America West, Federal Express, Northwest and American Airlines on why the industry deserves a big ticket bailout over other businesses and workers hurt financially by the terrorist attacks, such as travel agents, laid off airline employees, airport hotels and restaurants and machinists who supply airplane parts.

Committee members also pointed to multi-million dollar compensation packages earned by airline CEOs and executives and asked whether any sacrifices would be made in order to retain rank and file workers.

Leo F. Mullin, chairman and CEO of Delta Air Lines, reiterated that his industry is in a financial crisis. Mullin called attention to a letter from global financial services company Morgan Stanley saying that there is no capital financing available for airlines.

"Under current circumstances and without immediate financial support from the government, the future of aviation could be severely threatened," Mullin warned.

"For many airlines, there are no private sources of capital available," he said. "Financial liquidity in the industry is poor; already, airlines have announced layoffs of 51,000 airline employees and that number is expected to grow."

The U.S. Chamber of Commerce also supports a cash infusion for the airlines.

"Lawmakers must move swiftly to provide the funds necessary to prevent further catastrophe in the airline industry," said Thomas Donohue, Chamber president and CEO, in a written statement. "Supporting the U.S. airline industry is not a 'corporate' interest alone, it's a national interest," he said.

The Wall Street Journal editorial page has come out against the notion of an airline bailout, a term eschewed by the plan's chief proponents, other free market voices have been uncharacteristically silent due to the extraordinary circumstances surrounding the request.

"Other industries are now suffering through the same devastating aftermath" of the terrorist attack, wrote the Journal's editors. "Insurance companies are facing costs that could total $20 billion to $30 billion. After airlines get their $24 billion or so, what's to stop politicians from tapping taxpayers to bail out every other industry?"

"If the feds really want to do something for airlines, they might stop their nit-picking of airline mergers," the Journal suggested.

The libertarian Cato Institute, however, is not commenting on the proposed bailout, and the Heritage Foundation is treading carefully.

"I can say just as a matter of principle that we don't like government bailing out any industry," said Dan Mitchell. "Having said that, there's no question it's not the airline's fault, that caused this problem. But even then, the right approach is let's reduce the burden of government on them and not give them special handouts."

"Why don't we get rid of, at least temporarily, all the fuel taxes they're subjected to," Mitchell suggested.

Copyright 2001

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The airline industry is asking Congress for $17.5 billion in tax dollars to make up for a wide range of financial troubles stemming from the September 11 terrorist attacks on New York and Washington, D.C., including an ongoing drop in ticket sales, cutbacks in flight...
Airline,Bailout,Hearings,Reveal,Few,Cracks
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2001-00-19
Wednesday, 19 September 2001 12:00 AM
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