Copyright 2002 The Washington Post

The Washington Post
October 3, 2002 Thursday
Final Edition
SECTION: FINANCIAL; Pg. E02

LENGTH: 873 words

HEADLINE: Airline Relief Bill Clears House Panel;
Proposal Far Short of Carriers' Target

BYLINE: a Washington Post Staff Writer

BODY:


A House subcommittee yesterday approved a bill that would give more financial relief to the airline industry, but the airlines got less than they wanted.

The airlines would save about $ 1.5 billion a year under the bill, said Rep. James L. Oberstar (D-Minn.). The airlines had sought $ 4 billion to pay for increased insurance and security costs resulting from last year's terrorist attacks.

The bill would provide extensions on war-risk insurance and would reopen a federal loan-guarantee program if there is a war with Iraq. But it would not rescind the $ 2.50-per-passenger security fee, as the airlines wanted.

Delta Air Lines Inc., whose chief executive, Leo F. Mullin, has been one of the leading industry voices campaigning for the aid, said the bill was "an important first step."

A Delta spokesman, Tom Donahue, said: "We'll continue to support legislation that includes as many elements of security funding as possible. But the legislative process on this has just begun."

For the past two weeks, executives from Delta, American, Northwest and AirTran have testified to Congress that the industry was on course to lose a total of $ 15 billion in 2001 and 2002. The executives said most of the losses were because of increased costs resulting from the attacks.

Several members of the Senate Commerce Committee said at a hearing yesterday that they sympathized with the industry but opposed more aid. After the attacks, Congress quickly provided up to $ 15 billion in grants and loan guarantees to stabilize the industry.

Sen. John D. Rockefeller IV (D-W.Va.), chairman of the panel's aviation subcommittee, said other industries continue to lose millions of dollars but have not received federal aid. "In this environment with the federal budget deficit exploding, it is difficult to justify singling out the airlines for additional aid less than one year after the last package was approved," Rockefeller said.

Sen. Peter G. Fitzgerald (R-Ill.), who voted against last year's bailout, said he was against the bill, which he said is "more cleverly disguised" than last year's bailout.

"It appears this would shift about $ 1.5 billion in costs from the airlines to the taxpayers," he said.

If the bill is passed, it is unlikely that the airlines would receive any relief this year. A spokesman for the bill's author said there was a "50-50" chance that it would be ready to be presented to the House Transportation and Infrastructure Committee and prepared for a House vote before Congress's scheduled recess on Oct. 11.

The bill, created by the House panel's aviation subcommittee, would cap airlines' liability at $ 100 million for acts of terrorism affecting third parties, such as people injured in a building or on the ground.

The House bill, by subcommittee Chairman John L. Mica (R-Fla.), would also allow the airlines to purchase discounted war-risk insurance through 2003 at current premiums. The Transportation Department has been extending the policies for 60-day periods while increasing the premiums. The current policies expire Oct. 16. The bill would extend war-risk coverage to airline passengers and crew.

The bill would also extend the deadline for airlines to apply for the existing $ 10 billion in federal loan guarantees in the event of a war with Iraq. The airlines had until June 28 to apply for the guarantees. While 16 carriers applied, the Air Transportation Stabilization Board has granted only one loan guarantee -- to America West Airlines, for $ 380 million. The board has conditionally approved guarantees for US Airways and American Trans Air, totaling $ 1.05 billion.

In approving the bill, the House subcommittee defeated amendments proposed by Oberstar to require airlines to match checked bags with passengers and pay the government $ 750 million toward security costs.

Airlines have long fought bag matching, arguing that it would increase flight delays. They also have said that the government has not assumed $ 750 million worth of security measures. The airlines -- which have paid about $ 300 million for security this year -- said they were still required to perform many security operations such as screening airline caterers, ramp workers and additional airline personnel at security checkpoints and gates.

Mica suggested that Congress should consider giving the airlines a cash credit for their security costs, which he said should be dealt with later. "This is something that needs to be fairly negotiated," Mica said.

The House bill would also establish a deadline for mail screening, so letters could be carried on passenger planes. It would also create a committee made up of representatives from the Transportation Security Administration, the airlines and cargo shippers to recommend enhancements that would allow the carriers to carry more cargo. After the attacks, the government restricted the amount and type of mail and cargo they were allowed to carry, significantly reducing the airlines' revenue.

Also, the TSA would be required to reevaluate where they seat air marshals during flights after new, unpenetrable cockpit doors are installed. Airline executives have said having marshals fly in first-class seats reduces potential revenue from travelers.

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