A June 4 Business article misstated the amount of aid Congress has disbursed to airlines since the Sept. 11, 2001, terrorist attacks. Congress authorized a $20 billion financial aid package and has handed out less than $8 billion. The article said the airlines had received the entire amount. (Published 6/8/04)
Chief executives of the nation's largest airlines won no new promises of financial aid after outlining the dire condition of the aviation industry at a congressional hearing yesterday.
Lawmakers said they sympathized with the carriers' struggles but were not willing to provide further assistance to an industry that continues to rack up billions of dollars in losses.
"Congress is not going to underwrite losing airline operations," said Rep. John L. Mica (R-Fla.), chairman of the House Transportation and Infrastructure aviation subcommittee.
Legislators reminded the executives that the airlines received a $20 billion financial aid package after the Sept. 11, 2001, terrorist attacks, adding that the carriers must now restructure their operations on their own.
Chief executives from United, Continental, AirTran, Frontier, Northwest and America West underscored the burden airlines face from rising fuel prices, increased competition and declining fare prices due to the growth of low-cost airlines and the Internet.
Several executives urged Congress to trim some of the airlines' security fees and taxes. Gordon M. Bethune, chairman and chief executive of Continental Airlines Inc., said 26 percent of the price of an average round-trip tickets goes to taxes and security fees. "The power to tax is the power to destroy and nowhere is that more evident than within the airline industry," Bethune said.
Rep. James L. Oberstar (D-Minn.) said the airlines had some "legitimate" concerns about security costs, but dismissed the notion that the government should foot the entire bill.
Heightened security is a "benefit to the airlines," Oberstar said. "Without that security . . . people would not have come back to flying."
Several lawmakers raised the possibility that the Federal Aviation Administration would extend its war-risk insurance program for another three to five years. The government program provides coverage for acts of violence against airlines such as terrorism and hijackings. Airline executives say they are unable to obtain such insurance in the private markets at reasonable costs.
Gary Chase, an airline analyst at Lehman Brothers, said he expects low-cost airlines to continue to flourish despite rising fuel costs and that large carriers would still struggle. The industry has lost more than $23 billion between 2001 and 2003 and analysts expect an additional $3 billion in losses this year.
"Despite successful efforts over the last several years to improve profitability, we believe the network airlines must act further to reduce costs and increase flexibility," Chase said.