The Bush administration's response to the airline industry meltdown can be summed up simply: We have no policy.
Actually, that's not quite fair. The administration has half a dozen airline policies. None are coordinated, though, and a few look downright contradictory. Taken as a whole, they're not working.
Let's start with the Department of Transportation, which is supposed to be the lead agency but has yet to put forward a coherent analysis of the industry's problems, let alone a plan for how they might be solved. This failure was made painfully obvious at an industry conference two weeks ago. All Transportation Secretary Norm Mineta had to say was that the administration was in daily contact with the airlines and that all options were being carefully considered. Stop the presses!
As it turns out, Mineta's shop has probably made the airline situation worse by standing in the way of exactly the kind of mergers that could have helped rid the industry of its endemic overcapacity. Transportation helped block United Airlines' purchase of US Airways a couple of years back. And until this week, the department was threatening to nix an agreement among Delta, Northwest and Continental that will now allow them to operate more like a single airline. At a time when the industry is literally dying from excess competition, the Department of Transportation is worrying about how to encourage more of it.
Then there is the Airline Stabilization Board, which was set up after Sept. 11 to provide loan guarantees to cash-strapped airlines. This board might have been the vehicle to do for the airline industry what the Clinton Pentagon did for the defense industry after the Cold War: use financial incentives to encourage restructuring of the industry. But by and large, the three members of the board have taken a narrow view of their role, preferring to act like bankers rather than industrial policymakers. As a result, it has extended only about $1.5 billion in guarantees to US Airways and four smaller airlines, far less than the $10 billion Congress authorized.
Next up: the Pension Benefit Guaranty Corp., which last week agreed to take over the US Airways pension plan. Under the arrangement, US Airways employees will take less in the way of monthly retirement benefits, while the company, its creditors and the government agreed to throw additional money into the retirement pot. Whether other airlines will be offered similar deals was never addressed.
Finally, there is the White House, where the question of what to do about the airlines was hotly debated but never resolved. One camp, led by Treasury Secretary John Snow and Budget Director Mitch Daniels, argued for a policy of benign neglect as the airlines sort out their problems in the marketplace and the bankruptcy courts. Others, including Chief of Staff Andrew Card, argued that the political and economic costs of allowing the entire industry to be run through bankruptcy are unacceptable.
Unable to resolve the conflict, the president decided to punt, quietly telling congressional leaders that he won't propose his own airline rescue plan but will sign one like the $3 billion-plus packages unveiled yesterday on the Hill.
Unfortunately, the administration's failure to take the lead and come up with a comprehensive approach means we'll wind up with yet another industry bailout that has more to do with politics and special-interest pleading than with nudging the airlines toward long-term sustainability.
Such a fix would surely involve a more relaxed view of industry mergers, changes in the way airport gates and slots are allocated, and a search for a reasonable formula to finance airline security. It would also mean reforming labor rules, including seniority provisions that impede mergers and make it difficult for employees to move from one carrier to another.
At this point, the choice is not whether the administration should come up with an "industrial policy" for the airlines. The only choice is whether it will do it explicitly and do it well -- or continue to do it haphazardly while pretending not to do it at all.
Steven Pearlstein will host a Live Online discussion today at 11 a.m. at www.washingtonpost.com. E-mail him at firstname.lastname@example.org.