Execs tell Congress war with Iraq could worsen airlines' woes

WASHINGTON -- Airline executives told Congress on Thursday that their companies still face major financial problems that probably will worsen if America goes to war with Iraq.

Air travel has yet to return to pre-Sept. 11 levels. The number of people flying in November was down almost 18 percent from November 2000, according to the Transportation Department.

Since the attacks, the major airlines have laid off more than 80,000 employees, cut wages for others and reduced the number of flights, but they still expect to lose $9 billion last year. Two have filed for bankruptcy in the last six months -- United Airlines and US Airways.

"We've got most of the airlines broke and the rest of them begging," said South Carolina Sen. Ernest Hollings, the ranking Democrat on the Senate Commerce Committee that held a hearing on the financial condition of the airlines.

War in Iraq could make a bad situation even worse, American Airlines chief executive Don Carty told the committee. When the Gulf War occurred more than a decade ago, Carty said air travel plummeted.

What Congress can do to help the airlines "depends largely on whether or not we have a war with Iraq," he said.

Congress has twice helped the airlines since Sept. 11. In November 2001, President Bush signed into law a $15 billion aid package that included $5 billion in cash assistance and a $10 billion loan guarantee program.

Last year, Congress enacted a law to extend government-issued war-risk insurance and to limit liability against companies for the terrorist attacks, saving airlines an estimated $1 billion.

Carty said airlines need more, but he said they have yet to reach consensus on what Congress can do to help. Northwest Airlines' Chief Executive Richard Anderson also testified that the airlines need relief. Other airlines were represented as spectators by the Air Transport Association.

Some lawmakers were skeptical that more government aid is needed.

Incoming committee Chairman John McCain, R-Ariz., said low-fare carriers such as Southwest Airlines and JetBlue are making money. "The moral of the story is that every airline does not have to be unprofitable," he said.

Still, the committee pledged to look at a range of issues this year, including:

Are U.S. airports adequately protected from anti-aircraft missiles, such as the one fired at an Israeli jet in Kenya last year?

Should the limit on foreign investment in U.S. airlines be raised? And are foreign governments unfairly subsidizing Airbus Industries, the European manufacturer that is the chief rival to Boeing Co.?

Lawmakers also raised concerns that airline agreements to book passengers on each other's flights are anticompetitive. The Transportation Department is considering a proposal for Continental, Northwest and Delta to enter into such an alliance.

Several senators questioned whether the Air Transportation Stabilization Board was carrying out the wishes of Congress when it rejected applications for loan guarantees from United Airlines and others.

McCain and Sen. Trent Lott, R-Miss., filed a bill to amend a 1926 labor law to require arbitration between management and labor if a contract can't be negotiated.

Hollings said he expected to investigate whether the Federal Aviation Administration has enough inspectors to adequately oversee financially troubled airlines.

Major airlines have said they want to eliminate the $2.50 tax levied on every leg of a flight to pay for aviation security, but the executives didn't ask for it at the committee hearing. They say that cutthroat price competition doesn't allow them to pass that cost onto their customers.

A Bush administration official said the airlines won't get far if they ask for the tax to be rescinded.

"The administration's position, I'm sure, is that tax relief is not an appropriate measure," said Jeffrey Shane, associate deputy secretary of transportation.

Lott predicted Congress will pass two or three bills dealing with airline issues, but didn't say what they'd do. Lott is the incoming chairman of the aviation subcommittee.

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