Congress prepared to offer airlines emergency relief

WASHINGTON -- The House moved Thursday toward offering the airlines billions of dollars in grants, loan guarantees and liability limits to help them survive the financial blow from the terrorist attacks.

House leaders indicated they were ready to go further than a relief proposal made by the Bush administration. That plan offered the airlines $5 billion in immediate aid, $3 billion for security improvements and shielded carriers from parts of the lawsuits expected in the wake of last week's deadly hijackings.

Administration officials said they had a tentative deal with congressional negotiators to provide $10 billion in guarantees. The credit was contingent on establishing an independent board to oversee how the loan guarantees are dispensed. The original White House offer did not include such guarantees.

House Majority Leader Dick Armey, R-Texas, said the guarantees were important because "there is in the airline industry a need to have continuous, healthy, functioning lines of credit."

House Speaker Dennis Hastert, R-Ill., said the House measure would also ask airlines to fly at 80 percent capacity. He said he hoped to move the bill on the House floor Friday.

Delta Air Lines Chairman Leo Mullin, in a second day of testimony on Capitol Hill, told the Senate Commerce Committee that without government help, "the future of aviation is threatened."

The airlines want compensation for the direct effects of the Sept. 11 attacks -- the shutdown of all air travel for several days and prospects for a drastic reduction in air travel in the coming months.

Mullin sought $5 billion in direct aid, $12.5 billion in loan guarantees and liability relief.

Mullin indicated that several major airlines are on the verge of bankruptcy. Air carriers, along with Boeing, have announced layoffs of more than 100,000 workers.

The investment firm Morgan Stanley, in a letter to Treasury Secretary Paul O'Neill said there will be "no functioning capital markets for the U.S. airline industry" unless the government provides "relief from what would surely be bankruptcy-inducing liability claims against carriers for collateral damage and loss of life" from the attacks.

The White House proposed barring punitive damages and consolidating all lawsuits into a single federal court, the U.S. District Court for the Southern District of New York. It also suggested the government would pick up whatever cost of compensating victims for damages ultimately exceeds the limits of the airlines' insurance policies.

Congressional sources said late Thursday that liability and other issues such as a victims' compensation fund were yet to be resolved. House and Senate leaders were to meet Thursday night after President Bush's address to Congress to try to work out the remaining problems.

The Senate is expected to give quick approval to the rescue package once it clears the House.

But several Commerce Committee members said they wanted to be sure the relief was confined to losses directly related to the terrorist attacks, and was not used to prop up airlines that were failing before Sept. 10.

Other senators expressed reluctance about helping the airlines but doing nothing for the hotels, restaurants, travel agencies and laid-off workers also affected by the slowdown in air travel.

"Who finally will bail out the American taxpayer?" asked Sen. Peter Fitzgerald, R-Ill.

Committee chairman Sen. Ernest Hollings, D-S.C., a longtime critic of the airline industry, said agreed that short-term assistance is inevitable. "I don't think we can afford to dilly around," he said.

Mullin, representing the industry, said he was pleased with the $5 billion cash infusion, which he said would equal the airlines' losses between Sept. 11 and Sept. 30. He also liked the president's plan to provide $3 billion for airline and airport security improvements, including fortified cockpits, sky marshals and additional airport searches.

Bush also proposed that the government give airlines "temporary terrorism risk insurance" on all their domestic flights for 180 days. Currently, only international routes have such coverage.