- The Washington Times - Tuesday, January 15, 2002

America West Airlines has received final approval for a government-backed loan for $429 million, but other major airlines might not agree to the strict stipulations federal authorities require.
Congress approved $10 billion in loan guarantees as part of the airline-bailout package prompted by the September 11 attacks. So far, cash-strapped America West is the only major airline to tap into the fund.
Under the deal announced yesterday, the federal government agreed to repay as much as $380 million if America West defaults on the loan. In return, America West had to give the government the option to buy over 10 years one-third of the company's publicly traded stock at a fixed price 18.7 million shares for $3 each.
America West shares closed yesterday at $3.15, down 57 cents on the New York Stock Exchange.
The deal also calls for America West to give the government annual payments totaling $135 million over the nearly five-year life of the loan and a $3.8 million upfront fee.
"They gave a desperate airline the chance to turn their operation around, but at the same time they made it so difficult that most of the other airlines won't try to take advantage of what they may see as easy money," said Ray Neidl, an aviation analyst for ABN Amro.
After the attacks, Congress also approved $5 billion in direct cash payments to compensate air carriers for the business lost while the airlines were grounded immediately after the hijackings. So far, the Transportation Department has paid out $3.8 billion.
The Air Transportation Stabilization Board was established to determine which airlines get loan guarantees, which make the government a cosigner on the company's loan. So far, the only other airline to apply for a loan guarantee is Vanguard Airlines, a small, low-fare carrier based in Kansas City, Mo. Airlines have until June 28 to apply.
John Heimlich, director of economic and market research for the Air Transport Association, an airline-industry group, said that he expects others will apply and that the board will apply different requirements in each case, based on the airline's financial viability.
"If I were a carrier, I would use this as a last resort. I would do everything else that is within my means to survive," he said. "At the end of the day, if you need it, you're going to do it."
Which other airlines apply for government help depends partly on when the rest of the direct-payment money is made available and whether more passengers return to the skies, he said.
Tempe, Ariz.-based America West, which employs 12,000, is the nation's eighth-largest airline. Analysts believed it was the carrier most at risk for bankruptcy.

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