White House Proposes $8 Billion In Initial Aid To Airlines
Washington - The Bush Administration on Thursday proposed $8 billion in initial aid to the airline industry, with the promise that "additional steps" to assist carriers struggling in the wake of the Sept. 11 attacks soon would be announced.
In testimony before the Senate Commerce Committee on Friday, U.S. Department of Transportation secretary Norman Mineta said the initial proposal includes $3 billion to help airlines offset the cost of new security requirements, plus $5 billion "in direct and immediate payments to airlines, roughly in proportion to their size." Further, the administration called for "limited modifications" to airlines' collateral liability "to avert a near-term threat to the continued availability of insurance coverage."
The White House and Congress have balked at providing aid beyond making the carriers whole for direct losses sustained while the air traffic control system was shut down and for increased security costs.
Top U.S. airline executives held a series of meetings on Sept. 18 with Mineta, White House chief economic adviser Larry Lindsey and members of Congress initially to request support for a $24 billion package of loan guarantees, grants and tax relief. The airlines issued warnings that, without government assistance, at least some of them soon could be forced into bankruptcy as a result of the terrorist attacks.
Mineta described the meetings as productive, adding that information from the airline chiefs would be used to develop an administration legislative proposal that will be sent to Congress, probably early this week.
After the White House meeting, Delta Air Lines chairman and CEO Leo Mullin said, "We are in very urgent need of a financial infusion very, very quickly."
The industry group that met with Mineta and Lindsey consisted of Mullin; Fred Smith, FedEx chairman, president and CEO; Don Carty, American Airlines chairman, president and CEO; Gordon Bethune, Continental Airlines chairman and CEO; Richard Anderson, Northwest Airlines CEO; Rakesh Gangwal, US Airways president and CEO; John Kelly, Alaska Airlines chairman and CEO; and Jim Goodwin, United chairman and CEO. Also attending the session were DOT deputy secretary Michael Jackson, FAA administrator Jane Garvey, Air Transport Association president Carol Hallett and ATA senior vice president of industry policy John Meenan.
An information packet widely circulated by the airlines on Capitol Hill stated that, without prompt financial aid from the federal government, "Most of the U.S. airlines that make up the commercial air transportation system will go bankrupt and then likely liquidate."
The House already has a bill in play that would provide direct relief totaling $2.5 billion and further permits the president to delay quarterly tax payments and to issue to the carriers loans and loan guarantees of up to $12.5 billion.
Among companies that support aid to the airlines, American Express issued a statement, saying, "We believe a strong airline sector is critically important to the health of the United States and the global economy. The travel industry—and the airlines in particular—have been hit particularly hard by the fallout from last week's terrorist attacks. We believe there is an appropriate role for the U.S. government to play in providing immediate financial support to the airline industry."