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September 21, 2001

Abercrombie votes for emergency airline relief

Citing Hawaii’s hard-hit economy, Congressman Neil Abercrombie voted today for a bill to provide $15 billion in emergency financial relief to U.S. airlines reeling from the aftereffects of the September 11 terrorist attacks on the World Trade Center.

The Air Transportation System Stabilization Act (H.R. 2926) is the first component of a legislative package that will also address the needs of air travel industry employees who have been laid off, as well as airport security improvements and the attacks’ financial impact on collateral industries and their employees.

Today’s bill allocates $5 billion in direct federal payments to U.S. airline companies and another $10 billion in loan guarantees.

The formula for disbursing the direct payments, based on available seat miles flown in 2000, would provide $6.9 million to Aloha Airlines and $24.3 million to Hawaiian Airlines, according to calculations performed by the Air Transport Association.

Today’s measure also includes provisions to ensure insurance coverage and provide liability protections for the airlines.

"This bill is a welcome first step, because air travel is so important to Hawaii’s economy," said Abercrombie. "However, it’s only a first step. We need a lot more in the way of relief for employees facing layoffs. Their families have to put food on the table and pay the rent. They’re hurting now, and they need help asap. I’m going to keep pushing for emergency legislation to increase unemployment benefits and provide other kinds of kokua for the laid-off airline employees. We’re looking at bringing a bill to the floor next week, and we should move on it just as quickly as we did on the airline relief bill."

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Air Transportation System Stabilization Act (HR 2926)

This bill provides $15 BILLION in assistance to the U.S. airline industry to help stabilize the financial condition of the industry in the wake of the terrorist attacks on Sept. 11 -- $5 BILLION in immediate cash assistance and $10 BILLION in loan guarantees.

The measure limits the liability of American Airlines and United Airlines with respect to fatalities and damage that occurred on the ground when their hijacked jets were intentionally crashed by the terrorists, and it establishes a new system in the Justice Department through which victims of the terrorist crashes and their families may receive compensation for their losses. The measure also allows the Transportation Department to reimburse airlines for premium increases in aircraft insurance caused by the terrorist attacks, and it eliminates the requirement that airlines pay interest for late deposits of aviation-related taxes to the U.S. Treasury.

Under the measure, the federal funds used to support airlines or provide compensation to victims through the Justice Department's special master would not come from $40 BILLION in emergency funding provided to the president last week for responding to the attacks, nor would they be subject to annual limits on discretionary appropriations. Rather, they would be classified as direct, mandatory spending (essentially an entitlement).

The bill does not include the $3 BILLION requested by the administration for airline and airport security improvements, but it does positively affirm an informal agreement between the president and congressional leaders to allow the president to use part of the $40 BILLION in emergency response funding for this purpose.

Airline Financial Aid

Cash Assistance

The bill directs the Transportation Department to provide $5 BILLION in immediate cash assistance to U.S. airlines and cargo carriers to compensate the industry for losses stemming from the terrorist attacks on Sept. 11, including the shutdown of the nation's air system and any incremental losses incurred through the end of the year. This assistance is not intended to help the industry offset business losses that were incurred before the attacks, but to offset just those losses that are directly attributable to the attack.

Funds for this assistance are designated by the bill as "emergency" and would be available only to the extent they are formally requested by the president.

To receive cash aid, airlines would be required to provide proof of their losses to the Transportation Department and General Accounting Office (GAO). Of the total provided, $4.5 BILLION would be for passenger airlines and $500 million would be for cargo carriers. Assistance to individual airlines would be limited to the carrier's actual losses or to a pro-rata share of the total funding available (based on the carrier's industry-wide percentage of total seat miles or revenue ton miles) -- whichever is less.

Loan Guarantees

The measure allows the federal government to provide up to $10 BILLION in loan guarantees or other credit assistance to passenger airlines. Such loan guarantees are considered necessary for the continued operation of numerous airlines because commercial lenders have indicated they are reluctant to extend credit to the airlines, given the industry's current situation.

The bill establishes a four-member Air Transportation Stabilization Board to review and approve airline applications for loan guarantees or other federal credit. This board -- to be composed of the secretary of Transportation, Federal Reserve chairman, secretary of the Treasury, and comptroller general of the GAO -- would have to consider whether commercial credit is otherwise not available to the carrier, what the credit would be used for, and whether it is needed to maintain a safe and viable national aviation system.

Under the measure, loan guarantees could be provided to an airline only if the airline agrees during the next two years to limit total annual compensation to individual airline executives to the total level of compensation they received in 2000 (including salary, bonuses and stock awards), and they also agree to limit any severance benefits for executives who leave during that period to twice their 2000 compensation.

Airline Liability & Victim Compensation

September 11 Attack Liability

The bill limits the legal liability of American Airlines and United Airlines with respect to the fatalities and property damage that occurred on the ground when their hijacked jets were intentionally crashed by terrorists on September 11.

Under the measure, each airline would be liable for ground deaths and property damage only up to the limits of their insurance. All lawsuits against the two airlines would be routed through a single federal court -- the U.S. District Court for the Southern District of New York.

Victim Compensation

The bill allows persons injured by the terrorist plane crashes on Sept. 11 and the families of victims killed as a result of those crashes (including individuals on the four aircraft and those on the ground) to seek compensation for injuries or deaths through one of two mechanisms -- through lawsuits filed in the federal court or through a new Justice Department compensation program to be administered by a special master appointed by the attorney general.

Under the measure, this special master would review the claims of victims or their families to determine the amount of harm incurred and the amount of both economic and non-economic losses (including pain and suffering) to which the victim or family is entitled. Persons making claims would not have to prove negligence of any party. Upon filing a claim, however, individuals would waive their right to seek any compensation through lawsuits filed in the federal court.

The bill requires that the special master determine compensation levels for claimants within 120 days of the time a claim is filed. Funding for payments be provided through mandatory appropriations included in annual appropriations acts.

Liability for Future Attacks

The bill gives the Transportation Department discretion to limit the liability of U.S. airlines for any future terrorist attacks that occur within the next six months.

Under the measure, if the Transportation Department certifies that an air carrier is a victim of an act of terrorism, the airline would be liable for only $100 million in claims for damages occurring to third parties -- with the federal government assuming responsibility for any damages above that amount. The bill prohibits the awarding of punitive damages against either an air carrier or the federal government for claims made by such third parties.

Other Provisions

Aircraft Insurance

The bill allows the Transportation Department to use funds from the federal aviation "war risk" insurance program revolving fund to reimburse U.S. airlines for increases in aircraft insurance premiums that have occurred because of the Sept. 11 attacks. Under the measure, these reimbursements could be made only for coverage ending before Oct. 1, 2002, and the department's authority to make such reimbursements would expire six months after enactment.

(Since the terrorist attacks, many insurance companies have notified airlines of huge premium increases for coverage of their aircraft. The federal aviation war risk insurance program provides federal insurance to commercial aircraft that fly overseas into high-risk areas for U.S. foreign policy and national security needs -- such as to ferry troops and equipment to war zones -- when commercial insurance for such flights is not available on reasonable terms. The program's revolving fund is financed by premiums paid by airlines that receive coverage under the program.)

Airline Taxes

The bill waives any interest penalties that would otherwise be required by the Internal Revenue Service for the failure by U.S. airlines to pay certain aviation taxes on time (including employment taxes, and fuel and ticket excise taxes). It also allows the Treasury Department to further extend the deadline for the payment of such taxes to January 15, 2002.

(The department has already administratively extended the deadline for such tax payments to Nov. 15, but can not administratively waive the interest penalties for such delayed payments or further extend the deadline.)

Service to Small Communities

The bill urges the Transportation secretary to take all appropriate actions to ensure that commercial air service continues to serve all communities that were served before the Sept. 11 attacks and to ensure that essential air services to small communities continue without interruption.