jimntx
Veteran
Editorial in this morning's NY Times on-line. No judgement on my part one way or the other. Just posting it in case others don't have access to the "newspaper of record."
No Airline Bailouts
Published: June 17, 2004
As part of its overall strategy to emerge from bankruptcy court and restructure the company, United Airlines is hoping to get $1.6 billion in federal loan guarantees. This plan should be thwarted. United is not entitled to a form of taxpayer support that was meant to stabilize the airline industry in the aftermath of the Sept. 11, 2001, attacks. United's woes nowadays have little to do with that tragedy.
As one of its final acts, the federal board established by Congress to manage $10 billion in potential guarantees is reviewing a revised application from United Airlines. It has turned United down once, in 2002, and the merits of that decision have only become more compelling since then. The board — composed of representatives from the Federal Reserve Board, the Treasury and the Transportation Department — should stand firm in the face of pressure. A decision is imminent.
United filed for bankruptcy shortly after failing to get the loan guarantee the first time around, and since then, it has worked hard to reduce its unsustainable costs and improve service. Whether it has gone far enough to emerge as a viable carrier remains to be seen.
But that needn't be the government's concern. Congress mandated that in addition to determining an airline's ability to pay its debts, the board must predicate any loan guarantees on a finding that an airline's hardship stems from the terror attacks and that federal intervention is necessary to maintain an efficient commercial aviation system.
That is where United's case falls short. Airlines have already been given grants to compensate them for their immediate 9/11 losses. The loan guarantee system was a further security net for the industry in the event of a protracted terrorism-related slump, and perhaps even more attacks.
The fact that all of the old major airlines have lost money since the attacks is due to the economic slowdown, their loss of pricing power because of the Internet and competition from new low-fare carriers. Soaring fuel prices are only the latest affliction, and are one of the reasons the major airlines are expected to lose billions more this year, even though they are flying full planes and have cut their costs significantly.
Some of United's major competitors have been more adept at reinventing themselves in this new environment, without seeking taxpayers' help. It would be unfair for them to have to compete now with a partly subsidized airline.
As for the viability of the overall aviation system, there is no need for the government to be worried. And United, the nation's second-largest airline, has 16 percent of the market and tremendous assets. If it cannot deploy those assets profitably, someone else will, just as United once took over some of Pan Am's old routes.
No Airline Bailouts
Published: June 17, 2004
As part of its overall strategy to emerge from bankruptcy court and restructure the company, United Airlines is hoping to get $1.6 billion in federal loan guarantees. This plan should be thwarted. United is not entitled to a form of taxpayer support that was meant to stabilize the airline industry in the aftermath of the Sept. 11, 2001, attacks. United's woes nowadays have little to do with that tragedy.
As one of its final acts, the federal board established by Congress to manage $10 billion in potential guarantees is reviewing a revised application from United Airlines. It has turned United down once, in 2002, and the merits of that decision have only become more compelling since then. The board — composed of representatives from the Federal Reserve Board, the Treasury and the Transportation Department — should stand firm in the face of pressure. A decision is imminent.
United filed for bankruptcy shortly after failing to get the loan guarantee the first time around, and since then, it has worked hard to reduce its unsustainable costs and improve service. Whether it has gone far enough to emerge as a viable carrier remains to be seen.
But that needn't be the government's concern. Congress mandated that in addition to determining an airline's ability to pay its debts, the board must predicate any loan guarantees on a finding that an airline's hardship stems from the terror attacks and that federal intervention is necessary to maintain an efficient commercial aviation system.
That is where United's case falls short. Airlines have already been given grants to compensate them for their immediate 9/11 losses. The loan guarantee system was a further security net for the industry in the event of a protracted terrorism-related slump, and perhaps even more attacks.
The fact that all of the old major airlines have lost money since the attacks is due to the economic slowdown, their loss of pricing power because of the Internet and competition from new low-fare carriers. Soaring fuel prices are only the latest affliction, and are one of the reasons the major airlines are expected to lose billions more this year, even though they are flying full planes and have cut their costs significantly.
Some of United's major competitors have been more adept at reinventing themselves in this new environment, without seeking taxpayers' help. It would be unfair for them to have to compete now with a partly subsidized airline.
As for the viability of the overall aviation system, there is no need for the government to be worried. And United, the nation's second-largest airline, has 16 percent of the market and tremendous assets. If it cannot deploy those assets profitably, someone else will, just as United once took over some of Pan Am's old routes.
