- The Washington Times - Friday, April 25, 2003

American Airlines has joined the ranks of beleaguered big-carrier airlines, with its billion-dollar first-quarter loss and labor troubles. U.S. Airways and United Airlines have filed for bankruptcy. These developments would traditionally be followed by a hefty federal bailout, since the airline industry has been considered too big to let crash. The airlines, hoping for history to repeat itself, have been pushing for a $9 billion package in tax relief and other assistance. But key lawmakers, such as Rep. John Mica, chairman of the Aviation Subcommittee of the House Transportation and Infrastructure Committee, have said the airlines shouldn't get more cash than they've already been given. We agree.

Earlier this month, Congress gave airlines $3 billion to reimburse them for security costs, to cover a passenger security tax of up to $10 from June 1 to Sept. 30 and to extend war-risk insurance for 10 years, which is estimated to cost the government $605 million beginning in 2004. After the September 11 terrorist attacks, Congress awarded airlines a $15 billion bailout package.

The government is correct in covering some security costs for airlines. But pumping more taxpayer funds into airlines that may liquidate in the next couple of years would be foolhardy. United and U.S. Airways are currently at risk for liquidation, but not in the immediate future. On Tuesday, Reuters reported that a source familiar with United's finances claimed the airline would meet its bankruptcy loans next month. And big-carrier airlines typically die a slow death. Analysts expect that United or U.S. Airways could be forced to liquidate in the next two to five years.

While such a liquidation would be regrettable for employees, it would help eliminate some excess supply in the industry and relieve the competitive pricing pressure on the carriers but only temporarily. Low-cost carriers are expected to emerge quickly after a liquidation. These low-cost carriers are the best-performing airlines, and are expected to continue yielding good results. Southwest Airline reported this week its 48th consecutive profitable quarter, earning $24 million in the first three months of this year, and Jet Blue is ordering up to 200 new planes.

The success of Southwest and Jet Blue contrasts sharply with the American Airlines' escalating troubles. Despite the airline's dismal performance, management set aside hefty bonuses and bankruptcy-safe pensions for itself while leaning on unions to cut employee salaries. Had the carrier been performing well and not sought billions in taxpayer dollars in aid, such a package might be justified. But American taxpayers should not subsidize such benefits.

If these executives had been running the Titanic, they surely would have tried to sell the lifeboats for personal profit as the ship was sinking. Their conduct is infamous, adding one more reason to deny further subsidies.

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