Case Overview, Aviation Security

 

           After the terrorist attacks on the United States on September 11, 2001, the airline industry faced imminent disaster. Understandably, after 9-11 many Americans were terrified of getting on airplanes. The horrific images of airliners crashing into the twin towers of the World Trade Center in New York were indelibly imprinted on our collective conscience. If that wasn't enough of a problem, the nation quickly fell into a recession and the slower economy meant fewer business trips and fewer vacations and, thus, fewer airplane tickets sold. Finally, flying became a real hassle. The lax security that facilitated the airplane hijackings were replaced with more robust procedures that, in turn, led to long lines and long waits before one finally boarded the plane.

           In the immediate aftermath of 9-11, Congress moved rapidly to provide support for the airline industry so that the individual companies could remain afloat until more normal times returned. Quickly enacted into law was a stabilization package, providing both cash and loan guarantees to the airlines. It also contained a victim's compensation fund and a new limit on airline liability. A second law, the Aviation and Transportation Security Act, was passed a short time later. This statute replaced employees from the private companies that ran passenger screening operations at the nation's airports with newly trained federal workers. This helped to restore the nation's confidence in security procedures and the new government bureaucracy, the Transportation Security Administration, has supplied airports with a better trained and more competent workforce.
           Despite the ambitious nature of these two laws, the airline industry felt much more was needed to stabilize the industry. In 2002 it pressed Congress to enact more legislation. One problem was the "war insurance" that airlines are required to hold by law. It only applied to international flights and, in any event, insurance companies gave notice right after 9-11 that they weren't going to issue such policies anymore. The airlines also asked to be reimbursed for the expenses of fortifying their cockpit doors. There were other matters as well where the industry asked for some kind of financial relief. The most controversial policy proposal, arming airline pilots, was not one pushed by the industry. Indeed, some airlines were against giving guns to their captains, although they tended to be quiet about their views rather than appear to be soft on airline security. As one industry lobbyist said simply, "The Congress wants pilots to have guns."
           By and large the airline industry received the help it sought. The Homeland Security Act of 2002 incorporated a new means of providing war risk insurance and enacted a provision allowing pilots to carry guns. Additional appropriations to support the industry came in subsequent legislation. Despite the government financial aid and despite the growing passenger traffic, some airlines remain in perilous straits. As more and more routes are being served by nonunion, low cost carriers like Jet Blue and Southwest, the traditional trunk carriers like United and US Air, find themselves as a serious disadvantage because of their higher cost structure. The challenge for the government as it considers the next round of bills aimed at helping the airlines, is to try to provide legitimate support for security while at the same time respecting the free market and not providing subsidies that allow some airlines to keep their high cost structure intact.