Tags: White | House | Congress | Agree | Airline | Bailout

White House, Congress Agree on Airline Bailout

Friday, 21 September 2001 12:00 AM

"Last night, up on the Hill, an agreement was reached between the administration and congressional negotiators to secure a package to promote stability and security for the airline industry," White House Press Secretary Ari Fleischer said.

The agreement would provide $3 billion in immediate funds for air marshals and upgraded ground security. Those funds would come from the $40 billion emergency appropriation approved by both houses of Congress last week, Fleischer said.

Airlines would also receive an additional $5 billion in cash to replace lost revenue after flights were grounded by the Department of Transportation in the hours following the hijackings. The agreement also provides $10 billion in loan guarantees.

The Federal Aviation Administration on Sept. 11 shut down U.S. airspace, grounding 4,500 commercial and air freight planes just hours after terrorists used three hijacked fuel-laden jetliners to crash into the World Trade Centers in New York and the Pentagon building outside Washington killing more than 5,000 people. A fourth hijacked airliner crashed in rural Pennsylvania. The attack was the worst-ever on U.S. soil.

The government's action placed some airline carriers on the brink of bankruptcy and resulted in the suspension of operations by Midway Airlines.

Financial analysts estimated the airline industry would lose $4.4 billion in 2001 due to the attacks, double the predications before the attacks. Analysts cited higher fuel costs, security costs and lower passenger demand.

The pact closely resembles White House recommendations that would have given airline companies a $5 billion cash boost to compensate them for reduced passenger travel and federally mandated security requirements as a result of the attacks. The administration had also recommended $3 billion for enhanced aviation security and safety measures as well as liability provisions, but not the loan guarantees. The agreement does not call for the federal takeover of airport or airline security.

On Thursday, Fleischer said the airlines were distinct in their need for federal assistance because the FAA ordered the industry to put all their planes down on the ground.

"In essence, a government action took away their ability to generate revenue and to serve the country," Fleischer said.

Additionally, the White House proposal would have temporarily amended the insurance provisions to include acts of terrorism. It is unclear whether the negotiated agreement retained that amendment. The authors of the bill were still working on its language as of mid-day Friday.

Aviation industry analysts and airline executives predicted carriers that had been plagued with complaints from passengers about increasing flight delays will likely find that situation worsen with the federally mandated security upgrades that include no more curbside or off-site check-in. Airlines said they likely will be forced to cut service to keep passengers and planes moving on schedule. Those first round of cuts came late last week.

Continental and Continental Express announced they would discontinue flights to 10 cities and said they would be reducing its flight schedule by 20 percent and lay off 12,000 workers. Northwest Airlines officials said the company would review whether it would also lay off workers and announce its decision next week. Midway Airlines, based at the Raleigh-Durham International Airport in North Carolina, suspended flight operations one day after the terrorist attack and is offering ticket holders full refunds. The Boeing Company, based in Seattle, said it would reduce its workforce by up to 30,000 workers by the end of 2002.

United Airlines and American Airlines, based in Dallas-Fort Worth, both announced they were each cutting 20,000 jobs. Jets owned by United and American were used in the attacks.

In an effort to stem the financial hemorrhage airline companies are experiencing, Congress embarked on a series of hearings this week to salvage the nation's air transportation system.

Meanwhile, insurance companies worldwide are likely to alter their contracts with airlines considerably, as they bear the brunt of the costs to restore the damage created by the terrorist attacks. Analysts estimate that the costs for compensating for the direct losses alone could reach well over $20 billion.

Still, there is intense criticism that the airlines are taking advantage of the attacks as a means to salvage an industry that was already facing considerable financial difficulties. The vast majority of companies had been reporting heavy losses even before Sept. 11, due to higher fuel costs and less business travel as a result of the global economic slowdown.

Meanwhile, US Airways was devastated by news late summer that it would not be allowed to merge with United Airlines in line with antimonopoly legislation. The latest White House decision is likely to heat up the debate on whether taxpayers' money should be used to bail out private industry, especially when it had already been on shaky grounds.

Copyright 2001 by United Press International. All rights reserved.

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Last night, up on the Hill, an agreement was reached between the administration and congressional negotiators to secure a package to promote stability and security for the airline industry, White House Press Secretary Ari Fleischer said. The agreement would provide $3...
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2001-00-21
Friday, 21 September 2001 12:00 AM
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