Negotiators Reportedly OK Aid Plan for Airlines

Congressional and White House negotiators reportedly reached agreement late Thursday on a $15-billion airline rescue package. The agreement came as lawmakers were besieged by other industries seeking federal aid for losses suffered after the terrorist attacks last week.

Republican and Democratic leaders and the administration agreed on an aid package of $5 billion in cash and $10 billion in loan guarantees, wire services reported. Negotiations continued Thursday on providing some relief for U.S. carriers from liability for damages from the terrorist attacks.

The $15-billion package would be more than the $5 billion in cash assistance recommended by the Bush administration but less than the $24 billion originally sought by the industry and later scaled back to $17.5 billion.

It was expected to be taken up today by both the House and Senate.

An additional $3 billion would be provided for security measures from the $40 billion approved by Congress to help the nation recover from the terrorist attacks.

Separately, efforts are underway in Congress to give laid-off or fired workers extended benefits. Thus far the airline industry has cut about 70,000 jobs, and more cuts are expected. In addition, massive job losses are expected in related industries, such as hotels, restaurants and travel agencies. Those sectors are beginning to mount appeals for some sort of government aid.

During a Senate hearing Thursday, the airlines’ operations, from their finances to their ticket pricing, came under scrutiny. But senators indicated that they, like their House counterparts, would act swiftly to approve the aid, perhaps sending a bill to President Bush’s desk by early next week.

“We cannot allow our nation’s air transport system . . . which virtually every American depends on in some way, to become another casualty of last week’s terrorist attacks,” said Sen. John D. “Jay” Rockefeller IV (D-W.Va.).

Leo F. Mullin, chairman and chief executive of Delta Air Lines Inc., told the Senate Commerce, Science and Transportation Committee that the loan guarantees are an “essential element” of the package “to give the financial markets and creditors longer-term confidence in the industry so that they will invest.”

But in the meantime, the sudden slump in air travel and the potential for added security costs has prompted two agencies to cut the credit ratings of several carriers. American Airlines parent AMR Corp., United Airlines parent UAL Corp. and Delta had their credit ratings cut to junk by Standard & Poor’s. That followed a similar move Wednesday by Moody’s Investors Service.

In trading on the New York Stock Exchange, the stocks of the three biggest airlines declined in a broad market sell-off. Shares of Fort Worth-based AMR fell $1.55 to close at $18.45; shares of Elk Grove Township, Ill.-based UAL fell $1.53 to close at $17.23; and shares of Atlanta-based Delta dropped $1.81 to close at $21.85.

Several senators said they are looking to attach strings to the rescue package to ensure that funds are used only to help airlines recover from the unprecedented grounding of planes last week and the lingering public anxiety over flying.

Sen. Ernest Hollings (D-S.C.), the committee’s chairman, noted that when the Chrysler Corp. received a $1.5-billion federal loan guarantee in 1979, then-President and CEO Lee Iacocca’s salary was to cut to $1 a year. Mullin assured that airline executives’ compensation would be reduced.

Several senators said they are beginning to field calls from hotels, travel agents and others seeking a similar bailout.

“Who finally will bail out the American taxpayer?” asked Sen. Peter Fitzgerald (R-Ill.).

“It’s a political problem for us,” added Sen. John B. Breaux (D-La.).

Aviation insurance was among the issues still being negotiated. Under Bush’s proposal, the federal government would give airlines “temporary terrorism risk insurance” on all their domestic flights for 180 days. Currently, only international routes have such coverage.

But such coverage might be more difficult to obtain in the future. On Thursday, U.S. Aviation Underwriters, which insured American and United, said it stopped covering acts of war and terrorism.