Airline bailouts

The Bush administration’s initial offering to the airline industry – $5 billion for operating losses, $3 billion for improved security – is a small fraction of what the industry wants, and probably needs. But coming swiftly and with a minimum of conditions, it is an intelligent response in a difficult time.

Transportation Secretary Norman Mineta estimates that airlines are losing $300 million a day. In some cases, half of scheduled passengers are canceling; few who do not absolutely have to are choosing to fly, a condition likely to last at least another couple of weeks. Congress and the administration are working to shield the industry from some of the legal liability that is emerging, but the airlines are still certain to owe plenty. Investors are fleeing even as the industry chops tens of thousands of jobs. All of this and more are driving the industry, which was expected to lose some $3 billion this year even before the Sept. 11 attacks, toward bankruptcy.

To be rescued, the airlines proposed a

$24 billion bailout earlier this week, the details of which Congress was expected to work on today. The package would provide $2.5 billion for lost revenue, allow the airlines to keep all collected ticket and cargo taxes for the next year (worth $7 billion), repeal a tax on jet fuel and rebate another $4 billion worth of the fuel tax. It would use $10 billion for grants and loan guarantees to help out further.

Congress reportedly was thinking about a figure closer to a total of $15 billion, but whatever the final figure, the model for determining it should be the same. Up front, the airlines need a quick infusion of cash to keep operating, they need money for security both to improve safety and to improve passenger confidence and help lead the public back to flying, and they need evidence for investors that Congress is serious about longer-term help. That will come in the form of exemptions from some liability, perhaps the eventual federal takeover of airport

security and massive loans to keep the

airlines in business.

The extent of this aid will become clearer in the coming weeks as airlines develop better numbers on their losses from the attacks and separate them from the general downturn in the industry. Separating immediate and long-term support will also give Congress a better chance to see how the public reacts both to the Sept. 11 attacks and to any counterattack in the near future.

And while this seems like an unusually dark time for airlines, the reported comments of Nicki E. Grossman, intrepid president of the Greater Fort Lauderdale Convention and Visitors Bureau, are worth keeping in mind. “This is America. This can’t last,” she said. “We’ve got hotels willing to come up with package deals to keep business going. In the long term, we’re going to pull out of this and be fine. It’s not going to be business as usual, but we’re hoping it will be business.”

That probably is the best anyone can hope for, and reason enough for Congress and the airlines to keep hold of whatever optimism they can.