Members of Congress late last night approved a $15 billion measure to prop up the nation's airline industry and to limit carriers' liabilities as a result of the terrorist attacks last week.
The Senate voted 96 to 1 for the rescue package, accepting the contention that without a government bailout some carriers could be bankrupt within days. Although the airline industry has struggled all year, carriers say last week's attacks sent their costs and liabilities soaring and revenue plummeting.
The House of Representatives quickly followed the Senate's lead, voting just after 11 p.m. by 356 to 54 to approve the measure. It is expected to be sent to President Bush for his signature this weekend.
Although the measure drew scant opposition, many Democrats complained that it should have included help for workers who have lost their jobs as the airlines cut employment after the terrorist attacks.
At one point during the House debate, a frustrated Rep. Jay Inslee (D-Wash.) shouted out, "Why in this chamber do the big dogs always eat first?" Inslee was expressing his concerns about laid-off Boeing workers.
A last-minute effort by Rep. Peter A. DeFazio (D-Ore.) to add health care protection for laid-off airline workers and have the federal government employ airport security personnel -- measures already included in separate Senate proposals -- failed by 279 to 174.
The financial aid package includes $5 billion in direct grants and $10 billion in federal loan guarantees. It also absolves carriers from liability for claims as a result of property damage from the hijackings and crashes and limits airlines' liability for loss of life.
Analysts warned that some of the carriers may not survive, even with this federal help, and that few will return to profitability until people start flying more. Many planes are now operating with two-thirds of their seats empty.
Some lawmakers have acknowledged concerns about pouring taxpayers' money into ailing companies. But many said the air travel system, which is critical to the nation's economy, must not be crippled, especially as the country prepares for a global war against terrorism.
"We need to look at transportation again as part of our national defense," Sen. Hillary Rodham Clinton (D-N.Y.) said.
Sen. Peter G. Fitzgerald (R-Ill.) cast the dissenting vote in the Senate.
"Congress should be wary of indiscriminately dishing out taxpayer dollars to prop up a failing industry without demanding something in return for taxpayers," said Fitzgerald.
During the House debate, Minority Leader Richard A. Gephardt (D-Mo.) got a standing ovation after opening the debate over the bill by talking about the need for bipartisanship and the events that led to the need.
"Our American people have been so violated by what happened Sept. 11 that they hurt and they make you cry. We've been so damaged by this, so violated," he said.
Noting that the primary responsibility of the government is to keep its people safe, Gephardt added: "We all failed." The $5 billion in direct grants will be allocated based on an airline's seat miles -- the number of seats on an aircraft multiplied by the number of miles they fly. Under that formula, Delta Air Lines Inc. would receive about $800 million and Arlington-based US Airways Group Inc. would receive about $400 million.
A federal board, which will include Federal Reserve Board Chairman Alan Greenspan, Treasury Secretary Paul H. O'Neill, Transportation Secretary Norman Y. Mineta and U.S. Comptroller General David M. Walker, will decide how to allocate the $10 billion in loan guarantees. The board, which will be under the direction of the Office of Management and Budget, will presumably try to direct the loan guarantees to the airlines that appear to have the best chance of surviving.
The bill also authorized $120 million in spending to ensure that essential air service will be continued for small communities. The airline industry has been one of the weakest sectors of the economy all year. The general economic slowdown had dampened business travel. Airlines were struggling to repay debts they had run up buying fleets of expensive jets and to deal with high labor and fuel costs.
But the situation worsened substantially after the terrorist attacks and two-day grounding of airplanes. Individuals and corporations cut back dramatically on air travel. Insurance premiums shot up, with airlines warning that the higher insurance costs could keep them from flying. In addition, airlines faced huge liabilities from the deaths and destruction resulting from the hijacking and crashes.
Airline executives said that it suddenly became impossible for them to get loans and that they were quickly running out of cash.
The first effort to provide financial aid was blocked a week ago when Rep. Lloyd Doggett (D-Tex.) objected to the rush toward relief. But as layoffs in the airline industry approached 100,000 this week, the bailout effort gained momentum.
Action on the bill stalled temporarily yesterday as organized labor and trial lawyers tried to get their concerns addressed. But after Senate leaders agreed to consider a separate bill introduced by Sen. Jean Carnahan (D-Mo.) to provide up to $3.75 billion in health insurance, unemployment benefits and training for displaced airline workers, congressional and White House leaders were able to reach an agreement on a bailout bill.
The measure includes a cap on insurance claims for injury or loss of life at $100 million per airline. In addition, the federal government will -- for six months -- reimburse air carriers for the difference in their insurance costs before last week's attacks and after.
For those who were injured and the families of the passengers who were killed, the legislation provides two ways to seek compensation. Victims could go to federal court in New York, where claims will be consolidated. Or they could apply for payment through an administrative process to be run by the U.S. attorney general. In neither case could they seek punitive damages.
The bill also stipulates that executives at airlines getting direct financial aid cannot get raises for two years if their total compensation is $300,000 or more.
The legislation says that the government should attempt to get warrants, stock options or stock from companies receiving loan guarantees, so that the government might be able to profit if the airlines survive and their stocks recover.
Airline industry analysts said yesterday that the relief package would help the airlines only in the short term. Unless passengers resume flying, the airlines will need more federal aid, they said.
UBS Warburg airline analyst Sam Buttrick said, "The $5 billion should stave off most airline bankruptcies through the end of the year. But it doesn't buy them more than a couple of months." But he said the $10 billion in loan guarantees should help restore confidence among banks and Wall Street.
Still, he said, airlines must get passengers to become profitable. Airlines are filling only about 20 percent to 40 percent of their planes, whereas they need to fill about 60 percent to make money.
Buttrick said the estimated $400 million that would go to US Airways would be enough to keep the airline out of Chapter 11 bankruptcy protection through the end of the year. US Airways is considered one of the weakest airlines financially.
ABN AMRO Holding N.V. analyst Ray Neidl said US Airways has about $900 million in cash, down from $1.2 billion in June. Neidl said he does not expect air travel to pick up until mid-2002, and he questioned whether US Airways can survive that long.
The aftershocks from last week's events continued to spread through the airline industry yesterday. Northwest Airlines Corp. announced that it will eliminate 10,000 jobs, and Delta said it could reduce its workforce by as much as 16,000. Layoffs announced earlier by AMR Corp.'s American Airlines, UAL Corp.'s United Airlines, Continental Airlines Inc., US Airways and America West Holdings Corp.'s America West Airlines bring the total to about 91,000.
In addition to the financial bailout legislation, Congress is considering other measures to help airlines and airports. Sen. Ernest F. Hollings (D-S.C.), chairman of the Senate Commerce Committee, yesterday introduced separate legislation to have the government take over the job of screening airport luggage.
His bill, which has the support of his committee, would make airport screeners federal employees and would set tighter training and performance standards for the job. It would also increase the number of federal marshals available to accompany flights and require stronger cockpit doors and locks to make it more difficult for a hijacker to enter the cockpit during flight. The measure would be financed in part by a $1 per passenger security charge.
The bill was introduced just one day after a committee hearing in which Bush administration officials acknowledged the need for greater government oversight of airport security procedures but shied away from agreeing to make the screeners federal employees.
In the House, Rep. Don Young (R-Alaska), chairman of the aviation subcommittee, said that legislation dealing with security and dislocated workers could be voted on as early as next week.
While the airline relief measure was moving through Congress, European governments moved to help airlines with their higher insurance costs. Airlines in Europe had warned that they would be legally unable to fly after midnight Monday unless they received aid.
Late Friday, the British government agreed to provide airlines an indemnity for war and terrorism liabilities above the $50 million available from most commercial insurers and to waive payment for the coverage for 30 days. The German Finance Ministry said it also plans to help German airlines with interim insurance coverage.
Staff writers Keith L. Alexander, Juliet Eilperin and Caroline E. Mayer contributed to this report.