Capitol Hill subdued in response to airlines' plight

Washington — Airline workers, retirees and travelers may have thought that with four of the nation's largest airlines now in bankruptcy court, Congress would be rushing to help the beleaguered industry. But a combination of free-market ideology, antipathy to unions and "relief fatigue" has produced a subdued response on Capitol Hill to this week's Chapter 11 filings by Delta Air Lines and Northwest Airlines.

A few lawmakers are scrambling to build support for a modest measure to help airlines stretch out pension fund payments. But the industry's pleas for new tax breaks are getting little sympathy.

Members of Congress note that when terrorists seized and crashed four airliners on Sept. 11, 2001, the lawmakers raced to approve $5 billion in direct cash assistance and another $10 billion in loan guarantees.

"There is a sense of airline financial relief fatigue among members, who feel that we have already rushed to the well on their behalf with post-Sept. 11 support and it's now up to them," Rep. James Oberstar of Minnesota, the highest-ranking Democrat on the House Transportation Committee, said in an e-mail interview.

Even though travelers have shaken off fears of terrorism and returned to the skies at pre-attack levels, the airline industry keeps losing money because of soaring fuel prices.

On Wednesday, the Air Transport Association, an industry trade group, asked Congress to grant a one-year "holiday" from a 4.3-cent-per-gallon fuel tax, which would save air carriers about $600 million.

Airline analyst John Pincavage said granting that request would only swamp lawmakers with similar appeals from other industries hit hard by rising energy prices. "Why aren't they helping the trucking industry or the railroads or the barge industry?" Pincavage asked. "If they help one, they need to help all."

Congress' ability to grant such requests is being diminished by the rush to approve as much as $200 billion in Hurricane Katrina relief, which is increasing pressure to cut other spending.

Another factor encouraging inaction is that many lawmakers believe the industry will recover only when at least one major air carrier in bankruptcy shuts down. Not only are Delta and Northwest operating under bankruptcy court protection, but so are United Airlines, ATA Airlines and US Airways. The latter was cleared Friday to leave Chapter 11 and merge with America West.

That means the parochial interests of lawmakers from, say, Chicago, where United has a hub, may not be served by helping preserve Atlanta-based Delta. "Selfishly, each of them figures that if someone else goes out of business, capacity would go down," Pincavage said.

Dislike for unions

Because of the "intensely competitive nature" of the industry, "fares are running at late-1980s levels," James May, the transport association's chief executive, told the Senate's aviation subcommittee Wednesday. "One-fourth of all domestic passengers now pay $200 or less for a round-trip ticket," he said. A few recent fare increases in certain markets "are hardly enough to cover the cost of crude oil rising from $26 a barrel in 2002 to over $66 in 2005," he said.

From 2001 to 2004, the industry lost $32 billion. This year it will lose nearly $10 billion, May said.

Rep. George Miller of California, the senior Democrat on the House Education and the Workforce Committee and a supporter of airline pension relief, said the fact that many congressional leaders dislike unions also is playing a role.

The industry's financial problems are concentrated among "legacy" carriers — those created before deregulation in 1978. They tend to have expensive labor contracts and pension plans. Newer "low-cost" carriers, such Jet Blue and Southwest, typically have younger, cheaper workers. Such carriers generally have been profitable — at least until the latest round of fuel hikes.

Congressional failure to help legacy carriers might further boost the fortunes of the more nimble, less unionized airlines, Miller noted. An anti-union "attitude runs through this discussion," he said.

But if Congress offers no aid to legacy carriers, taxpayers might get stuck with an expensive tab for airline pensions.

The fear is that if all the troubled carriers were to transfer their pension liabilities to the Pension Benefit Guaranty Corp., the government-backed insurance agency would be swamped. The PBGC, which protects the private retirement plans of more than 44 million workers, already has a projected $87 billion deficit over the next decade.

Underfunded by $16 billion

The pension plans of Delta and Northwest alone are underfunded by more than $16 billion. If those two carriers were to terminate their pension plans, it would add $11.2 billion to the PBGC's deficit, while the employees would face benefit cuts of $5.1 billion.

Some carriers want Congress to help manage their massive pension funding shortfalls. Since July, two Senate committees have approved legislation to give major airlines 14 years to fully fund their pension plans, up from roughly four years. House-passed pension legislation does not have such a provision.

Sen. Johnny Isakson (R-Ga.), a primary sponsor of airline pension relief, said Friday that he had spoken with Rep. John Boehner (R-Ohio), the House's chief supporter of pension legislation. Isakson said he was optimistic that the House and Senate could develop a compromise that would provide industry-specific relief.

Rep. Tom Price (R-Ga.), a sponsor of the airline provision, said the bankruptcy of two airlines in one week raises chances for passage in the House. "I've gotten a better response since the bankruptcy filings," he said.

Isakson, who began pushing the issue this year, said he didn't think Congress was being particularly slow. "It took Congress 11 years to pass an energy bill," he said. "Eight months on a pension bill is not much."