Airlines Seek Another Congressional Bailout

WASHINGTON – Leaders of some of the nation's largest airlines asked Congress for additional financial help Tuesday, saying fewer passengers and higher security costs since Sept. 11 are devastating the industry.

Little more than a year after the airlines received a $15 billion aid package from Congress, they asked the House aviation subcommittee to consider tax relief, reimbursement for security costs and an extension of the terrorism insurance policies issued by the government after the Sept. 11 attacks.

"Airlines are not asking Congress to assist with economic or competitive challenges, but we do request that the government relieve the industry of government-imposed security costs stemming from the nation's war on terrorism," said Leo Mullin, chief executive of Delta Air Lines.

Rep. John Mica, R-Fla., chairman of the aviation subcommittee, said the airlines wouldn't get a government bailout but could expect some assistance with security costs.

"They need our help," he said.

Donald Carty, chief executive of American Airlines, said half of the airline industry's expected $7 billion in losses this year could be attributed to security costs. He predicted layoffs, bankruptcies and route cuts if the government doesn't help out.

On Wall Street, persistent worries about the industry's finances caused the stock prices of American and Delta to tumble to levels not seen since the early 1980s. Shares of American, the nation's largest carrier, dropped 62 cents, or 15 percent, to $3.60; those of Delta, the third-largest airline, fell $1.24, or 11 percent, to $10.06.

Blaylock & Partners LP analyst Raymond Neidl said Tuesday that an industrywide comeback was possible in the long term, but that a recovery wouldn't begin until spring at the earliest. It really depends on if and when the broader U.S. economy rebounds, he said.

Neidl said lower passenger volume, reduced fares and the rising cost of jet fuel are significant obstacles to profitability.

War in the Middle East could exacerbate the airlines' woes by causing jet fuel prices to rise and passenger travel abroad to drop, the airline leaders said.

Aviation subcommittee members said they were willing to give the airlines temporary help, but some lawmakers said the industry needed to fix problems it brought upon itself.

"The carriers seem unable to muster the discipline to reasonably price their product," said Rep. James Oberstar, D-Minn.

But Mullin said government-imposed security requirements cost Delta, which represents one-sixth of the industry, $660 million in 2002. Delta's terrorism insurance rose $150 million, new cockpit doors cost $20 million, the loss of seats to federal air marshals cost $35 million and restrictions on cargo cost $90 million, Mullin said.

The $2.50 security fee levied every time a passenger boards a commercial aircraft cost the company $265 million, Mullin said.

He asked for a temporary suspension of the security fee and extension of government-issued terrorism insurance.

The airlines also want more money for retrofitting cockpits with bulletproof doors. Michael Wascom, a spokesman for the Air Transport Association, said the government is only reimbursing airlines for $14,000 of the $45,000 cost of each door.

The airlines also hope Congress will lower the amount they're required to repay the government for the costs of screening passengers and baggage.

Before Sept. 11, airlines paid for the screening. After the attacks, the government took responsibility and airlines agreed to reimburse the cost based on their 2000 expenditures.

The airline industry recently told the Transportation Security Administration it spent about $300 million on security in 2000. But the Department of Transportation's inspector general pointed out that the major airlines had claimed before Sept. 11 -- and testified twice afterward -- that they spent $1 billion annually on security.

Wascom said the $1 billion figure was only a rough estimate, and that it's difficult to tell how much is spent on security.

The Senate Commerce and Transportation Committee plans to hold a hearing on airlines and the economy on Wednesday, according to a spokesman for its chairman, Ernest Hollings, D-S.C.