Airline Industry Wants Another Boost

A boy looks around a toy store Saturday, Aug. 4, 2007, in Manila, Philippines. Toys made by Mattel based on popular characters like Barney, Dora and Diego were recalled in Asian and European countries after the toymaker warned of lead in the paint. China temporarily banned two toy makers whose products were subject to massive recalls in the U.S. from exporting their goods and urged them to overhaul their business practices. (AP Photo/Pat Roque, FILE) CBS

Struggling airlines are asking the government for financial help little more than a year after Congress approved a $5 billion cash bailout and a $10 billion loan guarantee program to aid the industry after the Sept. 11 attacks.

Air carriers blame lower passenger volume and higher fuel and security costs for expected losses of between $6.8 billion and $7 billion this year, according to Michael Wascom, spokesman for the Air Transport Association, which represents major airlines. US Airways Group declared bankruptcy in August, and United Airlines may follow.

"This crisis is crippling the aviation system, and it's being exacerbated by a variety of well-intentioned government policies," Wascom said.

Airline executives were to appear Tuesday before the House Transportation aviation subcommittee to ask the government to pick up more of the cost for aviation security and insurance and to lower their taxes.

They're likely to encounter some skepticism.

The Business Travel Coalition, an advocacy group representing business travel customers, opposes financial support for the airlines.

"They have had at a minimum 12 months to address the structural problems that are at the root of their losses today," said Kevin Mitchell, chairman of the Business Travel Coalition, which represents 51 corporations that do extensive business travel. "Congress should let the marketplace discipline this industry."

The airlines are hoping 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 security. After the attacks, the government took responsibility and airlines agreed to reimburse the cost.

The airlines told the Transportation Security Administration they spend about $300 million annually on security. But the Department of Transportation's inspector general pointed out the major airlines 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.

Rep. John Mica, R-Fla., chairman of the House aviation subcommittee, agreed that security costs pose a problem for airlines.

Mica said he opposes giving large amounts or bailouts to the airlines, but Congress would be willing to consider helping them in other ways.

"This country is extremely dependent on the aviation industry," he said. "If it goes down the tubes, we're in big trouble."

Liability insurance, for example, has risen for some airlines from several million dollars annually to hundreds of millions annually. Mica wants the government to extend the war-risk insurance policies it issued after Sept. 11.

He said he's also willing to consider other ways to help the airlines.

The airlines want temporary suspension of taxes and fees, such as the jet fuel tax, if the United States goes to war with Iraq, Wascom said.

They also want more money for retrofitting cockpits with bulletproof doors. Although the government will pay about $14,000 per door, the cost is about $45,000 he said.

The airlines want the government to take responsibility for screening caterers and food carts loaded onto airlines, Wascom said. Now, he said, only minimal screening is done.

Finally, the airlines will ask for no increase in the $2.50 security fee travelers pay every time they board a plane.

"We cannot shoulder any additional government-imposed taxes or fees," Wascom said.

The Senate Commerce and Transportation Committee plans to hold a hearing on the state of the airline industry next week, according to a spokesman for the chairman, Ernest Hollings, D-S.C.
  • John Esterbrook

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