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Congress’ proposed $3 billion plus airline assistance
package can’t address industry-wide issues that continue to plague bookings
and costs outside the industry’s control, analysts and lobbyists contend.
Recent traffic statistics show March was hit hard by the onset of war with Iraq
and the emergence of Severe Acute Respiratory Syndrome, or SARS, in Asia
that left passengers nervous about international airline travel. Merrill
Lynch analyst Michael Linenberg added that the “movement of Easter from
March of last year to April of this year has also led to depressed
results.” He said domestic load factor at Continental dropped 3.2 points,
while traffic fell 7.6% and capacity was down 3.7% (DAILY, April 3).
American showed international loads down 6.2 points and “as such, we think
March’s system unit revenue could be down 9% to 11%, compared to a year
ago.”
Linenberg said questions remain as to whether the White
House will try to eliminate any aid. Last week, Sen. Patty Murray
(D-Wash.), a member of the Appropriations Committee and ranking member on
the transportation subcommittee, sent a bipartisan plea to the
Administration asking it toretain the $225 million included in the airline
aid portion of the war supplemental to assist laid-off airline workers.
Congressional sources contend the workers’ aid is in no danger, and given
the bipartisan support for airline aid it’s likely the White House will
demand cuts to whatever package emerges from conference this week. Linenberg
agrees.
“Although the government has been vocal about not
lending a helping hand — and we agree that too much money provided to the
airlines is not a good thing — we do believe Congress will prevail,” he
wrote. Linenberg thinks the most likely elements to survive will be an
extension of war-risk insurance, a security fee holiday and reimbursement
for federally mandated post-Sept. 11 security initiatives. One Capitol
Hill source told The DAILY he doesn’t see how congressional aid “overcomes
the severe problems on the revenue side,” such as a drop in bookings or the
cost of un-hedged fuel or minimally hedged fuel. “They need cash flow,” one
staffer said. “A chunk of money from Uncle Sam will help,” but “whether
that will be enough to overcome the double whammy of reduced revenue and
higher operating costs I rather doubt, especially in the case of the
carriers in the weakest position going into the [Iraqi] conflict.” Todd Hauptli,
senior VP-legislative affairs for the American Association of Airline
Executives (AAAE) and Airports Council International (ACI), said lawmakers
want to ensure the industry gets help but don’t want to interfere with any
necessary industry restructuring.
Hauptli is confident the industry will get close to $3
billion, but he noted it’s “not enough to fix everything. It’s an important
step to get the federal government on record to pay for security costs for
airliners and airports. It’s an important precedent and a step forward.”
Ed Faberman, president of the Air Carrier Association of America, agreed.
“If you’re losing the kind of money some large carriers are losing, this
will not make the difference of survival. “Clearly many of them were doing
things that were driving them toward failure way before 9/11 and before
some of these security issues even appeared,” Faberman said. “Moreover some
of them continue to do dumb things, and all of it cannot be blamed on the
war or lack of interest in flying.” But he contended that government
should foot the bill for federally mandated requirements, such as hardened
cockpit doors and helping with war-risk insurance. The Senate aid package
contains war risk insurance relief but the House version does not. “I don’t
believe any airline can afford to search the private marketplace for
war-risk insurance at this time,” he said. It’s also fair to ask the
government for relief on security fees, he added. -DM
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