WashingtonWire - 2004-06-21

Mica: Congress Won't Act To Aid U.S. Airlines

Failing U.S. airlines must reform themselves rather than turn to Congress again for help, said House transportation aviation subcommittee chairman John Mica (R-Fla.). He said Congress already has provided "significant assistance" to airlines since the 2001 attacks, including more than $20 billion in cash, loan guarantees, direct reimbursements, tax holidays, allowing airlines to delay shoring up their pension plans and passing war risk insurance. "Despite this amount of assistance, the financial condition of some of our airlines is precarious at best," Mica said at a hearing earlier this month. "In today's marketplace, those who fail to model a low-cost carrier operation may not survive. Congress cannot re-regulate the airlines to save them from market competition."

Continental Airlines chairman and CEO Gordon Bethune and Northwest Airlines CEO Richard Anderson, who were among a half-dozen airline chief executives to testify, said the industry has taken dramatic steps to remain viable. Those steps have included layoffs, flying fewer planes and scheduling changes to stay competitive. "At this point, other than further workforce reductions or changes to wage scales (to the extent they can even be negotiated), there is little the industry can do to reduce costs," they said. "Certain costs cannot be controlled. The run-up in fuel prices has cost the industry close to $3 billion in 2004 and may not abate sufficiently in 2005."

JayEtta Hecker, director of the physical infrastructure team at the General Accounting Office, said it's unlikely most legacy airlines will survive. "Legacy airlines, burdened by significant costs of labor contracts and pension plans negotiated during profitable years and an extensive and costly network infrastructure, have found it difficult to reduce costs quickly enough to become cost competitive and restore profitability," she said. "Although legacy airlines still control two-thirds of all domestic traffic, possess profitable overseas routes and have valuable domestic route structures, until these airlines are able to bring their unit costs closer to those of low-cost airlines and align their services with fares that passengers are willing to pay for, they are unlikely to be able to improve their financial condition."

GAO: TSA's Airport Efforts 'Fragmented'

The U.S. government isn't doing enough to screen airport employees accessing such sensitive areas as runways, according to a new report by the General Accounting Office. The congressional auditor called efforts by the Transportation Security Administration "fragmented" and "not cohesive" and said the agency should do more to secure airport perimeters and access control points. "The agency has not determined how the results will be used to make improvements to the entire commercial airport system," GAO's yearlong investigation found.

Sen. Joseph Lieberman (D-Conn.), the senior Democrat on the Senate Governmental Affairs Committee, said the investigation shows a gaping hole in airport security. About 1 million people work at U.S. commercial airports, including catering employees, refuelers, cleaning crews and baggage handlers. "Since Sept. 11, TSA has done much to screen passengers and their baggage but has neglected other less visible areas of an airport's operation," said Lieberman, who requested the GAO investigation. "The bottom line is that airports remain too vulnerable to terrorist attack, and yet TSA has no overall picture of perimeter, entry/exit or worker security at the nation's 440 commercial airports."

TSA said it is taking steps to implement GAO's recommendations. The agency also said it is concerned that the report gives a misleading impression that the agency "has done less than it actually has to provide security for commercial aviation," said spokesperson Mark Hatfield Jr. "If the report fails in any area, it ignores many of the efforts that TSA has undertaken to enhance security for commercial aviation."