Federal purchases of airline stock - bad idea

A worse idea is hard to imagine than that the federal government could end up owning large chunks of stock in our commercial airlines. Yet that is where we could be heading due to a provision in the post-Sept. 11 federal airline bailout package.

The potential stock purchases were made possible by a provision in the $15 billion bailout bill to help the airline industry following September's terror attacks on New York and the Pentagon. Lawmakers wanted collateral for any loans for which the companies may apply. Hence, the stock purchase.

Congress voted to provide $5 billion in cash payments and $10 billion in loan guarantees.

"When we deregulated, the whole idea was to get government's hand out of the airline business. This kind of lets them in," said Dean Headley, associate professor at Wichita State University and co-author of an annual study on airline quality.

This is a cautionary episode in the tricky business of rushing to bail out industries said to be deserving after catastrophic events such as those of Sept. 11.

Such appeals are hard to resist, as events following Sept. 11 proved yet again.

The sole U. S. Senate vote cast against the bailout, as it was being rushed through, was cast by Illinois Republican Peter Fitzgerald. That courageous vote, in this instructive episode, is beginning to look better and better.