Bush to seek $5 billion bailout for airlines, but no immediate loans to avoid bankruptcies

Posted: Thursday, September 20, 2001

WASHINGTON (AP) -- President Bush will ask Congress to give the nation's beleaguered airlines $5 billion in immediate cash aid plus significant help with their insurance liability -- but not, for now, the loans that the industry says it needs to avert bankruptcies, an administration official said Wednesday.

Bush will immediately spend $3 billion of the emergency funds that Congress gave him over the weekend to pay for airline and airport security improvements such as fortified cockpits, sky marshals and additional airport searches.

White House advisers briefed key congressional staff on the package late Wednesday.

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.

Bush is also proposing to help shield airlines from inevitable lawsuits related to last week's terrorist hijackings. He would bar punitive damages and consolidate all lawsuits into a single federal court, the U.S. District Court for the Southern district of New York. The government would also pick up whatever cost of compensating victims for damages ultimately exceeds the limits of the airlines' insurance policies.

The administration official, who provided details to The Associated Press on condition of anonymity, said Bush believes such measures are the ''essential steps for immediate safety and stability'' and, once they are enacted, he and the Congress will talk about loans in order to bolster the airlines' longer-term solvency.

Delta Air Lines Chairman Leo Mullin told Congress on Wednesday the industry wanted $12.5 billion in credit and loans.

Congressional leaders were hoping the House would approve an airline rescue bill by week's end. Many lawmakers of both parties have expressed a desire for quick action to help the airlines, which have suffered big losses and laid off tens of thousands of workers after last week's terrorist attacks.

''The financial damage is and continues to be devastating,'' Mullin told the House Transportation Committee. He cited the shutdown of service last week and prospects of sharply reduced business in coming months.

After a White House meeting between Bush and congressional leaders, House Speaker Dennis Hastert, R-Ill., told reporters that Transportation Secretary Norman Y. Mineta would give Congress recommendations by Oct. 1 for legislation addressing other, more complex airline problems.

These include future airline security and the legal liability for the Sept. 11 attacks, in which four airliners were hijacked and crashed into the World Trade Center, the Pentagon and woods in western Pennsylvania.

Several lawmakers said any package should also include help for the estimated 100,000 airline workers expected to be laid off because of reduced flight schedules.

The major airlines have already announced plans to cut flights back by about 20 percent.

''Our challenge is to restore public confidence in air travel and to revive airline finances so this cornerstone industry ... can recover in the shortest possible period,'' said Rep. James Oberstar of Minnesota, ranking Democrat on the panel.

Bush, speaking to reporters, said the Sept. 11 attacks had dealt a ''shock'' to the economy and that ''we'll respond to the emergency in terms of working on a package for the airline industry that has been severely affected.''

Mullin said the industry could suffer anywhere from $18 billion to $33 billion in losses related to the attacks, when hijackers seized four planes.

''I think it's safe to say that among the top 10 airlines that there are three who are on the brink'' of bankruptcy, he said. Mullin did not specify those three, but Douglas Parker, chairman of America West Airlines, said his company was one of several that could go under if the federal government does not step in.

Mullin also asked Congress to pass separate legislation specifying that, because the terrorist attacks were an act of war, the airlines should not be liable for fatalities and property damage occurring on the ground. The government should also bear much of the cost for enhanced security in airports, he said.

The House originally suggested $15 billion for the industry in legislation proposed last week and the industry came back with a request for $24 billion. The two sides appeared headed for the $17.5 billion figure after discarding the idea of allowing the airlines to keep ticket and fuel taxes. Those taxes generally go to an airport trust fund that airports can use to improve security.

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