Congress OKs Airline Aid Package

Congress swiftly approved a $15-billion federal aid package for the battered U.S. airline industry Friday while setting up a government fund to compensate the families of victims of the Sept. 11 terrorist attacks. President Bush was expected to sign the measure.

The relief bill, approved by the House, 356-54, and the Senate, 96-1, was designed to help the airlines recover from crushing losses stemming from the unprecedented air travel shutdown the week of the attacks, higher insurance and security costs, and a public now skittish about flying.

It provides $5 billion in cash assistance and $10 billion in loan guarantees, and it limits the liability of American Airlines and United Airlines for their hijacked planes that crashed into the World Trade Center, the Pentagon and the Pennsylvania countryside. An additional $3 billion for airline and airport security measures comes from $40 billion previously approved by Congress to pay for the recovery and for counter-terrorism.

Under the bill, the federal government could receive airline stock and options as collateral for the loan guarantees, which could pave the way for the government to take part ownership of struggling airlines.

The swift action came after a week of warnings by the airlines and others that some U.S. carriers could file for bankruptcy--and that others might lose their insurance coverage--within days if Congress failed to act. Since the attacks, most major airlines have cut thousands of jobs and slashed flight schedules 20%.

After a long, tense day of private bickering over the details, a majority of Democrats and Republicans came together to support the bill, maintaining the spirit of bipartisanship that has prevailed in the capital since the attacks.

Still, labor-friendly Democrats complained that the measure did nothing for laid-off workers. And budget-conscious Republicans objected to the open-ended victims compensation fund.

In the Senate, only Peter Fitzgerald (R-Ill.) dissented.

In the House, Rep. F. James Sensenbrenner Jr.(R.-Wis.) said: “This bill creates a new entitlement program to pay families of victims of this tragedy through taxpayers’ dollars. No entitlement was enacted by Congress to compensate victims of the Oklahoma City bombing, earthquakes in California, hurricanes in Florida and floods along the Mississippi River.”

Rep. David R. Obey (D-Wis.) said, “If we’re going to have everybody get into the lifeboat . . . there ought to be a lifeboat not just for investors and CEOs, but the workers.”

Although most agreed that aid was necessary to keep the carriers flying in the days ahead, many said it did not address the airlines’ longer-term problem--the falloff in travel by business and leisure passengers that is robbing the industry of badly needed revenues.

“Unfortunately, it’s more of a stopgap measure than it is a solution,” said Hugh Randall, travel and transportation specialist at Mercer Management Consulting in Washington. “We have probably delayed the financial restructuring of multiple airlines, but we have not eliminated the problem.”

Airlines have been losing millions of dollars a day since their planes were grounded by the government after the terrorist attacks. The airlines, which originally asked for $24 billion, have said that it could take a year for the industry to recover from the attacks.

Before Congress acted, Northwest Airlines announced plans to cut 10,000 jobs, nearly one-fifth of its work force. That brought total industry job cuts or layoffs, including those of aircraft manufacturer Boeing, to more than 100,000.

Congressional leaders pledged to work on a measure that would extend benefits and other assistance to laid-off workers.

“We don’t want the terrorists to win,” Sen. Bill Nelson (D-Fla.) told his colleagues. “If they cause financial distress to a major component of America’s economic engine, then they will have scored a victory. But we’re not going to let them.”

Lawmakers asserted that the so-called air transportation stabilization package was not a bailout, like the $1.5-billion federal loan guarantees to Chrysler and the $250-million loan guarantee to Lockheed Aircraft Corp. in the 1970s.

The legislation establishes an Air Transportation Stabilization Board to set the conditions for loan guarantees. The board is to be chaired by the Federal Reserve chairman or his designee, with members to include the Treasury and Transportation secretaries and comptroller general.

The legislation authorizes the Treasury Department to negotiate warrants--options to buy airline stock at a fixed price in the future. When Chrysler received federal aid, the government received warrants, which later earned taxpayers a $300-million profit.

“If the federal government is going to guarantee $10 billion to the industry, the taxpayers deserve something in return,” said Fitzgerald, who pushed for the provision. He voted against the measure because he believes it provides more money than the airlines lost because of the attacks.

Under the measure, individual air carriers’ liability stemming from the Sept. 11 attacks would be limited to the amount of their insurance.

It also provides for ways for those injured or victims’ families to seek compensation, but not punitive damages. They may sue in federal court, where their claims would be consolidated, or they could apply for relief from a taxpayer-backed victims compensation fund, which is not part of the $15-billion package. A special master, appointed by the attorney general, would decide how much each claimant should receive from the government fund for lost wages and pain and suffering, minus payments received from insurance policies and other sources.

The measure also requires airlines accepting aid to cap the salaries of highly paid executives. But some lawmakers objected that it would still allow executives to earn millions of dollars a year. “It makes a mockery of the idea of shared sacrifice,” said Rep. Henry A. Waxman (D-Los Angeles).

The measure is less than the $24 billion sought by the industry, which it scaled back to $17.5 billion. The Bush administration had backed $5 billion in cash assistance, plus the $3 billion for security improvements, but sought to put off the loan guarantees.

The airlines’ trade group praised the bill’s passage. “Although we understand the difficult decision that confronted many of our elected leaders, we are gratified that our nation’s airlines will not become the first economic casualty of this war,” said Carol Hallett, president of the Air Transport Assn.

Edmund Greenslet, editor of the trade publication Airline Monitor, said some form of financial triage was clearly justified for the airlines. “When the industry is being used as the tool of a wartime attack, there’s a good basis for having some type of support” by the U.S. government, he said.

But stabilizing the airlines financially will not fill their seats, he said.

“I don’t see this in itself going to address the anxiety problem,” Greenslet said. That, he said, will required heightened security, the absence of further terrorism in the skies--and the passage of time.

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Times staff writer James F. Peltz in Los Angeles contributed to this report.