Hopefully, this will have the desired effect.
Sept. 14, 2001, 11:51PM
Congress clears funds for airlines
$15 billion in aid, loans OK'd
By KAREN MASTERSON and LAURA GOLDBERG
Copyright 2001 Houston Chronicle
WASHINGTON -- Congress considered an airline bailout package Friday that would provide the industry with $2.5 billion in direct aid and another $12.5 billion in loan guarantees.
The action came amid lobbying by the industry, which even before Tuesday's terrorist attacks shut down commercial air traffic nationwide, was expected to lose more than $2 billion this year.
Gordon Bethune, chairman and chief executive officer of Houston-based Continental Airlines, said Friday that without a government bailout, many carriers likely wouldn't survive.
"I know that for liquidity purposes, if there's not an infusion like that amongst at least the 10 airlines that I know about, that they won't be around here at the end of the year," Bethune told NBC news Friday afternoon. "There's a good likelihood."
Bethune did not name specific carriers, including his own. But he suggested the carriers needed government help "so we can get on our feet and resize our companies to meet the decreased demand."
At the end of this year's second quarter, Continental reported it had more than $1 billion in cash on hand.
Airline industry officials, including Continental, met with lawmakers and asked for an open-ended $2.5 billion assistance package, and several airline companies warned if they didn't get it, they'd have to file for bankruptcy next week, according to congressional aides familiar with the meetings.
But aides said lawmakers balked at the request. Instead, they wrote a bill that would require proof of those losses through financial statements and other relevant data.
The $2.5 billion would be available for six months and only for "direct losses" associated with the federal shutdown of air traffic on Tuesday. Flights resumed again Thursday.
"This is paying for that (federal) decision (to close air traffic)," said House Majority Whip Tom DeLay, R-Sugar Land, who helped piece together the bailout package.
A Continental spokesman declined to answer questions about Bethune's comments, including whether he meant that Houston's largest employer, with more than 20,000 workers here, would be forced to lay off employees. Bethune declined comment to the Houston Chronicle.
In a voice-mail message to employees Friday night, Bethune said Continental would have to cut its flying schedule to match the reduced demand for travel.
By Friday, most carriers had resumed flying, though at significantly reduced levels. Would-be travelers already had begun canceling flights.
In addition to fewer passengers in upcoming weeks and months, the airline industry also faces higher costs for new security measures.
The pilots union at Northwest Airlines said Friday that Northwest executives told them the carrier may face layoffs.
Estimates put industry revenue losses at $250 million or more each day that planes did not fly.
Lawmakers scrambled Friday to piece together the package, but were unable to do it fast enough to pass before adjourning for the weekend.
House leaders from both parties hoped to pass something before Wall Street opens for business Monday.
"If we don't solve the problem immediately, airline stocks could plummet," said Rep. Don Young, R-Alaska, chairman of the House Transportation and Infrastructure Committee.
In a report Friday, airline analyst James Higgins of Credit Suisse First Boston, predicted airline stocks could drop in value by more than 50 percent when the market opens.
That came a day after Sam Buttrick, an airline analyst for UBS Warburg, estimated the airline industry could lose $4.4 billion this year, $2.1 billion from the terrorism.
He also said it was possible more than one airline could go bankrupt. Midway Airlines, a smaller carrier based in North Carolina, filed for bankruptcy in August. Wednesday, it stopped operating.
An initial agreement was to earmark $2.5 billion for the industry out of the $40 billion emergency spending bill Congress approved Friday -- money needed for military counterstrikes, to beef up intelligence-gathering capabilities and to provide recovery services to areas affected by the attacks. But Democratic leader Richard Gephardt forced changes in the House bill to require the money to come from a separate appropriation.
"As a free-market conservative, my first instinct is to let the market work this out," said Rep. John Culberson, a Houston Republican and member of the House Transportation and Infrastructure Committee.
He echoed concerns shared by many lawmakers. But both parties and Culberson agreed that markets and air-travel consumers would be devastated if the nation's largest air carriers failed financially.
"This is not a bill to make up for past problems," said Rep. Roy Blunt, a member of the House Energy and Commerce Committee, which oversees aviation. It's to protect an industry critical to the nation's way of life, he said.
Southwest Airlines, the dominant carrier out of Houston's Hobby Airport, is interested in some type of federal package, said Gary Kelly, executive vice president and chief financial officer. But it's not facing immediate bankruptcy or anticipating layoffs, he said.
Dallas-based Southwest has a strong balance sheet and a large amount of cash, said Kelly, cautioning that the airline cannot survive indefinitely without revenues.
"We are not in danger of imminent bankruptcy by any stretch of the imagination assuming we resume normal or somewhat normal operations relatively quickly," Kelly said.
He could not predict what passenger traffic would look like in coming weeks. While Southwest has had a lot of cancellations, the airline still has bookings for October.
Next week, Congress is expected to finalize details of the bailout, perhaps as part of a larger airline industry package that provides tax breaks to air carriers -- an exemption from the fuel tax and other tax breaks, including allowing airlines to keep the airline ticket tax.
The money is a prelude to major changes to the airline industry, as the government prepares to impose strict security measures.
Changes may include a complete takeover of baggage X-ray and passenger luggage searches by the military -- or some kind of trained security officers -- functions currently run by air carriers and carried out by civilian employees.
Texas Sen. Kay Bailey Hutchison, a Republican member of the Senate Commerce, Science and Transportation Committee, has introduced a bill to put sky marshals on flights. And lawmakers are looking for ways to better secure cockpits.
"Shutting down the airlines and our air traffic system would allow them to win, and we can't allow that to happen," Hutchison said of terrorists. But she added there must be major changes to make the system secure.