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Congress Grants Airlines $3B Bailout

AIRLINE INDUSTRY graphic
AP
Struggling airlines will receive $2.9 billion to ease the impact of war and terrorism under an agreement reached by congressional negotiators on Friday.

Of that, $2.4 billion would come as cash within 30 days, which would be especially helpful to major airlines that are heavily in debt and losing money. The relief package, which includes unemployment compensation for laid off workers, totals $3.2 billion.

Bush administration officials labeled $3 billion in relief as excessive. They said the airline industry already got $15 billion in federal help after the Sept. 11 attacks and market forces should determine which airlines survive.

Lawmakers also disregarded White House objections to a provision that extends unemployment insurance for 26 weeks to aviation industry workers who've lost their jobs since Sept. 11, 2001.

In working out the differences between the House's $3.2 billion plan and the Senate's $2.7 billion version, negotiators at one point had whittled proposed unemployment insurance to 13 weeks for airline workers alone.

But Sen. Arlen Specter, a Pennsylvania Republican, and Rep. David Obey, a Wisconsin Democrat, prodded the committee to extend unemployment insurance for 26 weeks and expand the benefit to workers for airlines, airline manufacturers, suppliers and airport workers. The move restored an amendment sponsored by Sen. Patty Murray, D-Wash.

Obey argued Congress should help workers since negotiators had weakened proposed restrictions on airline executives' compensation.

"If we're going to take such great care of the CEOs of the airlines in this coming amendment, it seems to me we could be taking a little better care of the workers," Obey said.

The agreement limits the salaries for airlines' top two executives to 2002 levels, loosening Senate restrictions that would have capped the compensation of their top five executives. The compromise also exempts stock and preexisting retirement contracts from calculations of executive pay. Airlines that violate the rule would lose their government grants, and the restrictions don't apply to smaller airlines.

The airline relief plan is part of a supplemental budget to pay for the war in Iraq, which President Bush is likely to sign.

Rep. John Mica, R-Fla., chairman of the House aviation subcommittee, said members of Congress grew more charitable toward the airlines because the war in Iraq and severe acute respiratory syndrome, or SARS, have depressed air traffic.

The $2.4 billion in cash represents reimbursement for security costs, including $100 million to help pay for the fortified cockpit doors the airlines had to install by last week. The airlines will also get a holiday from the passenger security tax of up to $10 per round-trip between June 1 and Sept. 30.

The plan calls for the government to extend war-risk insurance for 10 years, which is estimated to cost the government $605 million beginning in 2004.

Major airlines lost $18 billion since the hijackings because of terrorism fears, overcapacity, mismanagement and high labor costs, say airline analysts. Since the war began, airlines announced 10,000 job cuts, according to industry estimates.

The airline industry said it needs at least $4 billion to cover costs for enhanced security and passenger declines that stemmed from the war and concerns about terrorism.