Copyright 2002 The Washington Post

The Washington Post
September 25, 2002 Wednesday
Final Edition
SECTION: FINANCIAL; Pg. E01

LENGTH: 752 words

HEADLINE: Airlines Plead for Aid;
CEOs Seek Help on Costs Related To Terrorism;
House Bill Drafted

BYLINE: Keith L. Alexander and Sara Kehaulani Goo, Washington Post Staff Writers

BODY:


Airline chief executives yesterday implored lawmakers to help with terrorism-related security and insurance costs, which they said were sinking the industry, and key House members said they were drafting a bill to help the carriers.

The bill would extend government-backed war-risk insurance and allow airlines to reapply for $ 10 billion in loan guarantees in the event of war with Iraq. Other details -- such as whether the government should reimburse airlines for first-class seats used by federal air marshals, pay for the cost of strengthening cockpit doors or eliminate jet-fuel taxes -- have not been decided upon, congressional aides said.

Chief executives from Delta Air Lines, Northwest Airlines, American Airlines and AirTran Airways told the aviation subcommittee of the House Committee on Transportation and Infrastructure that airlines were in terrible financial condition and could not afford the terrorism-related security costs, which they claimed could reach $ 4 billion.

"Our industry is experiencing an unprecedented financial crisis," said Leo F. Mullin, Delta chairman and chief executive. "While it is airline management's responsibility to deal with economic or competitive factors, the industry's ability to address the current crisis is seriously limited by the staggeringly high costs of well-intended post-9/11 actions by the government related to security."

The aviation subcommittee's chairman, John L. Mica (R-Fla.), hopes to reach an agreement with Democrats on the airline bill by the end of the week, according to a committee spokesman.

The measure is expected to extend the war-risk insurance program for another year. Under this program, which was set up after the terrorist attacks last year, the government provides insurance to cover airline damages that result from war. Airlines said the cost of this kind of insurance in the private sector has skyrocketed.

The Senate's Commerce, Science and Transportation Committee last week approved a bill that would extend the government's war-risk insurance for nine months.

The House bill would also revise the $ 10 billion loan guarantee program, set up after the terrorists attacks caused passengers to flee airlines. The deadline for applying for a loan guarantee was June 28. The House bill would allow airlines to apply again if there is a military conflict with Iraq. So far, only one airline has received a loan guarantee, while 15 others, including US Airways and United, are still waiting to hear from the government.

Airline executives also told House lawmakers they were worried that any war with Iraq could cause their jet-fuel prices to soar. War with Iraq is a "chilling prospect for all of us," said Donald J. Carty, president and chief executive of American Airlines.

"As such, given that the U.S. government determines what specific regime needs to be in place to secure our nation's airways, it should pay" for airport security, Carty said.

Several House members said they were sympathetic, and Rep. James L. Oberstar (D-Minn.) suggested that the Defense Department should cover the costs of some of the airport-security improvements.

The panel rejected, however, the airlines' request that lawmakers remove a $ 2.50-per-passenger security fee that was put in place at the beginning of this year to fund security improvements.

Meanwhile, airline executives said they were meeting with the Office of Management and Budget and the Transportation Department to try to negotiate a reduction in the $ 750 million the industry is to pay the government this year for airport security costs.

The transportation security law passed by Congress last November directs airlines to pay a fee that "may not exceed . . . the amounts paid in calendar year 2000 by carriers" for airport security screeners, training costs and screening equipment. Last year, airline executives testified, they spent about $ 1 billion annually on security-related costs.

But airlines argue they should pay only $ 300 million, because the government still hasn't taken over all of the security functions and because airlines' security requirements have increased.

OMB Director Mitchell E. Daniels Jr. said before yesterday's meeting with Mullin: "I know they would like to be relieved of an obligation they took on to contribute the amount they said they were spending on security. But from anything I know at this point, that was a fair deal at the time and should be honored."

Staff writer Mike Allen contributed to this report.

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