Help, but no bailout, seen for ailing airline industry

By Leslie Miller
Associated Press

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 yesterday.

Likewise, Republican leaders in Congress say they understand the airlines are taking a hit because of the war, but many members are reluctant to give 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 close to 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.

Democrats might go further because they believe the airlines' health affects national security and jobs, said House Democratic whip Steny Hoyer of Maryland.

DeLay and Frist said it's possible help could be included in the supplemental budget plan Bush requested yesterday to help pay for the war. Prospects are uncertain, because lawmakers want to pass the bill quickly, and 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 ... fewer airlines, then so be it."

Major carriers lost more than $10 billion in 2002. The airlines blamed security requirements for $4.1 billion of that loss.

Airlines say the war could add $4 billion to losses this year. They have asked for relief from taxes and from costs of added security. But Rep. John Mica, R-Fla., chairman of the House Transportation aviation subcommittee, said Congress is unlikely to support the tax cuts.