Wednesday, March 26, 2003 | 9:42 a.m.
WASHINGTON -- Troubled U.S. airlines probably will get some federal help to offset losses caused in part by the war effort but not nearly as much as the $9 billion they want.
The White House is not inclined to support a major bailout, said an official knowledgeable about President Bush's discussions on the airlines with his senior economic team.
Bush believes the industry must restructure itself and is willing to let market forces determine which airlines will survive, the official said Tuesday, noting the market will cause the airline industry to restructure through bankruptcy proceedings.
Likewise, Republican leaders in Congress say they understand the airlines are taking a hit because of the war, but many members are reluctant to approve another huge bailout. After the Sept. 11 attacks, lawmakers gave airlines $5 billion in cash and $10 billion in loan guarantees. Nevertheless, two of the largest carriers, United Air Lines and US Airways, are bankrupt, and American Airlines is teetering on bankruptcy.
Senate Majority Leader Bill Frist, R-Tenn., said he expects some help will be approved for the airlines but did not indicate how much.
The House majority leader, Tom DeLay, R-Texas, said airlines have incurred additional security costs and deserve help. He would not say how much he feels is needed.
"We have no idea. It is very controversial," DeLay said.
Democrats may be willing to go further because they believe the airlines' health affects national security and jobs, said House Democratic whip Steny Hoyer of Maryland.
Hoyer said he'd support a $9 billion package for the airlines. "When you have a crisis, the richest nation on the face of the earth can certainly afford to borrow (the money needed)," he said.
DeLay and Frist said it's possible help could be included in the $75 billion supplemental budget plan that Bush requested Tuesday to help pay for the war. Prospects are uncertain, because lawmakers are seeking to pass the bill quickly and get it to Bush by April 11. Adding money for airlines could slow the process.
J.P. Morgan airline analyst Jamie Baker said federal aid might prevent bankruptcies in the near term but won't fix the industry's fundamental problem: excessive labor costs.
"Any government assistance would come in the form of a Band-Aid. Most airlines require major reconstructive surgery," he said. "We would much rather see market forces prevail, and if that means one, two and even three fewer airlines, then so be it."
Since the Sept. 11, 2001, attacks, airlines have cut more than 100,000 jobs, slashed costs, closed reservation centers and changed flight schedules to use planes more efficiently.
Still, major carriers lost more than $10 billion in 2002. The airlines blamed security requirements for $4.1 billion of that loss, including indirect costs such as background checks and aircraft inspections, as well as direct payments to the federal government for security.
The airlines say the war could add $4 billion to losses this year. They have asked for relief from taxes and from costs such added security such as bulletproof cockpit doors.
Delta Air Lines, the nation's third-largest carrier, said Monday it would shrink its network by about 12 percent as a result of fewer travelers since the war began in Iraq. The cutbacks at Delta followed similar moves made last week by United, Continental Airlines and Northwest Airlines.
Airline unions are urging Congress and the White House to help the ailing industry. In Chicago, Paul Whiteford, the chairman of United's branch of the Air Line Pilots Association, asked for emergency relief from the "crushing taxes and costs of security levied on the airline industry."
"We ask the government to provide the type of relief necessary to save our jobs, protect our families and secure our economic freedom," Whiteford said.
Rep. John Mica, R-Fla., chairman of the House Transportation aviation subcommittee, said Congress might support extending war-risk insurance, which protects airlines from liability claims for injuries resulting from war or terror, and reimbursing them for some security costs. But he said Congress is unlikely to support tax cuts the airlines have asked for.
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