Industry presses gov’t for aid to combat terror

 - May 7, 2008, 7:48 AM

Declaring that “this meeting is not designed to ask for a bailout of the American airline industry,” U.S. Chamber of Commerce president Thomas Donohue said last month at the chamber’s second annual national aviation summit that “we’re simply asking government not to require the airline industry to absorb more than its fair share of the costs associated with the war on terrorism and defense of our homeland.”

According to Air Transport Association (ATA) figures, the financial impact of government policy on the airline industry is $6.5 billion, and Donohue stressed that “more mandated, unreimbursed costs threaten to knock out a wobbly airline industry that is vital to every one of us.”

He called on Congress to free up the $10 billion in guaranteed federal loans (for which only one of 16 applicants has so far been approved), pass terrorism insurance legislation to rein in “outrageous” premium increases, make airport security a more shared responsibility between the airlines and the government and work closely with the industry to create a safe and secure travel experience without creating undue hassles.

Sitting on a panel representing aviation users and analysts, NBAA president Jack Olcott said aviation security represents issues of national defense and should not be focused on the airlines or on business aviation per se. “The thought of just taxing the airline passenger because of the war on terrorism,” he said, “is like saying that the residents of Pearl Harbor should have paid for World War II.”

The heads of both Delta Air Lines and American Airlines warned that without relief from security costs and taxes, there is a question whether the majority of the commercial airline industry is going to survive. “We have to fight like hell to stay out of bankruptcy,” declared Leo Mullin, CEO of Delta. “We are not here for a bailout. We are talking about paying for security.”

American Airlines CEO Don Carty said 26 percent of the cost of a $200 ticket goes to the government, while on short-haul flights with a ticket price of $100, 40 percent goes to the government coffers. Although industry and FAA forecasts of recovery are “relatively optimistic,” he said, “it is going to take a long time to dig out of this.” He further predicted that airliners currently parked in the desert will never go back into service.

Rep. John Mica (R-Fla.), chairman of the House aviation subcommittee, agreed with the industry executives that “right now the industry is facing a crisis.” As sponsor of the Aviation Industry Stabilization and Reform Act (H.R.5506), he acknowledged that the airlines were in trouble before September 11, with the economy “on a slight downturn.”

But since then, Mica said, the industry has had a difficult time recovering, having also been hit by some extraordinary costs. “When we try to develop a solution for government to be a partner and aid in the problems the industry is facing,” he said, “I try to dwell on what the costs are and how we can best assist. Government can’t be in a position to feed the dinosaurs of businesses that are going to expire in any event.”

Mica conceded that the new cost of security has accounted for almost half of the $7- to $8 billion loss in the industry. And hailing from a business background, he said, “I warned that anytime government takes over a responsibility or activity, it costs twice as much, takes twice as long and requires more people. And that is exactly what we have seen.”

Mica said H.R.5506 would save the industry about $1 billion in the cost of war-risk insurance if the bill is finally approved by Congress. “That is a substantial amount of money when you are talking about a $7 or $8 billion deficit,” he said. “I think the government has the responsibility–not to bail out the industry, not to feed dinosaurs that are going to go down the tubes–but to assist one of the most important economic sectors in our nation.”

But the Florida congressman also cautioned that there are still some fundamental problems in the aviation industry, which were shoved into the background because of the “overreaction to security and the cost that has come with that.”

According to Mica, “We’ve also, unfortunately, in this time of terrorist attacks and terrorist threats, lost sight of the big picture in the aviation industry in America. We have got to go back and continue to modernize our air traffic control system.”

He also called for restructuring of the FAA. “If the Chamber of Commerce or your businesses ran the way the FAA runs, you’d be out of business or you’d close the doors of the chamber,” said Mica, who has often described the internal workings of the agency as dysfunctional. “It is a challenge we must address.”

At the time of the Chamber’s summit early last month, Congress had not yet approved the transportation appropriations for fiscal year 2003, which began October 1. And Transportation Secretary Norman Mineta expressed concern about the effect that would have on the Transportation Security Administration (TSA).

“The TSA is especially disadvantaged by this process because it does not have money from previous years to help bridge the gaps between its programmatic needs and the funding it receives [under stopgap measures],” said Mineta, who keynoted the meeting. “This is a difficult situation for us as we strive to meet our upcoming statutory deadlines for airport security.”

He assured the gathering that his department, which oversees the TSA, was working “diligently” with Congress and the White House to ensure that the TSA has the resources it needs to carry out its responsibilities. “We all want the same results; our standard is world-class security balanced with world-class customer service,” he said. “Our nation’s well being and economic health depend on that standard.”

Mineta said that “in seven short months,” the TSA will have hired 39,000 security screeners and placed thousands of them at more than 157 of the busiest commercial airports. TSA boss James Loy assured him that the November 19 deadline for replacing private screeners with federal passenger screeners will be met, as well as the December 31 deadline for having baggage screeners and the necessary explosive-detection equipment in place.

Meanwhile, all airlines have interim devices to prevent pass- enger access to cockpits, and all of them will have permanent installations in place by next spring, Mineta said, adding, “We’ve begun the process of ensuring that our pilots and flight crew are better trained for hijacking scenarios.”

The former congressman said that the TSA has dramatically expanded the Federal Air Marshal program, which covered more flights in August than in the entire previous history of the program. Further, 148 federal security directors have been named to oversee nearly 400 airports.

But Mineta expressed concern that passengers are still carrying prohibited items. “In spite of the events of the past year, our airport screeners are still intercepting large numbers of prohibited items,” he said. “In September alone we intercepted at least 62,000 knives, 112,000 other prohibited cutting devices, nearly 3,000 box cutters, more than 2,000 incendiary devices and 59 firearms, and we made 21 arrests through passenger security screening.” From February through September, screeners intercepted more than 3 million prohibited items, including more than 800 guns and 783,000 knives.

Responding to a question from the audience, Mineta said that his department is “trying to work as hard as it can” to make sure airports across the country are kept open to general aviation. He admitted that the closings and airspace restrictions have all been dictated by the National Security Council, the Secret Service or other security agencies.

“I know that this is a source of frustration to the general aviation community,” Mineta told the chamber group. “But this is something that is beyond our control. We keep pressing, but we have not been successful, especially with opening up [DCA] to general aviation.”