CHANGING COURSE

One of the first acts of Congress after September 11 was the $10 billion airline bailout package. With their attention keenly focused by the attacks, lawmakers rightly determined that the addition of terrorism to recession could force many airlines into bankruptcy and cripple the economy.

A key element of that package is a $400 million loan guarantee program, designed to give airlines access to the private-sector capital needed to rebuild and restructure. Although those needs are as great as ever – perhaps greater, given the sluggish pace of the economic recovery and the languishing rate of business travel – the congressional gaze is wandering.

The House voted last week to suspend the guarantee program until after the Oct. 1 start of the next fiscal year, with no guarantee the suspension would be lifted. This provision was inserted in the $29.4 billion emergency defense bill in a way that denied lawmakers the opportunity to vote on not doing something they voted to do just eight months ago. A similar sleight of hand is in the works in the Senate.

The stated reason for this suspension, according to the House Republicans which engineered it, is that the summer travel season is getting under way and the increased vacation trade will provide all the bailing out the industry requires. The not-stated reason is that, in the House’s hands, President Bush’s $27 billion anti-terrorism bill has swollen to $29.4 billion (the latest add-on being a nice subsidy for Southern textile manufacturers) and something had to give. The Senate Appropriations Committee version tops $31 billion and also proposes a suspension of the loan guarantee program, although some key Republicans, such as Rick Santorum of Pennsylvania and Maine’s Susan Collins, are opposed to this unwarranted change of course.

The airlines remain in perilous financial condition; losses are mounting. Business travel has not recovered and other travelers are picking up the tab; three of the four biggest airlines raised fares last week to herald the advent of summer. The fare gap between travel on major routes and smaller routes continues to widen. Airlines with plans to upgrade regional air service – such as US Airways, which has a $1 billion rebuilding plan that includes a new fleet of mid-sized jets for medium and small markets – are having to shelve those plans and prepare for bankruptcy court instead. The commission created to review applications for loan guarantees has been frugal and meticulous – to a fault, according to the many air carriers that have had applications rejected for failing to demonstrate sufficient public benefit.

Air service that is convenient and affordable is as much an economic essential as highways and rail lines. The lack of it is one of the greatest impediments to economic development in rural regions and small cities; yet in hard times, that is the first service cut. The loan guarantee program remains a good idea; all that has changed is Congress’ focus.