Airline Bailout: How Big, How Crucial?

During the summer, some of the major carriers announced job cuts, hiring freezes or other cost-cutting measures, like the retirement of older airplanes. But many industry executives seemed taken aback by the bottom-line results, even though signs of economic trouble had been brewing for several months.

"We have all been very surprised by the abruptness of the downturn in business travel," said Thomas W. Horton, chief financial officer of AMR, the parent company of American Airlines, the nation's largest carrier, in July. "It may signal that the general economy is weaker than we believe."

"None of us have seen this type of downturn before," United Airlines chief financial officer Douglas A. Hacker told industry analysts in July.

And now that the terror attacks seem likely to drive away even more business, the airlines have packed enormous expense cuts into little more than a week. American has even announced it will stop serving meals on domestic flights of less than two hours.

Like the Savings and Loans?

But while times are undoubtedly tough for the airlines, how does their potential aid package stack up to past government relief efforts on behalf of corporate America?

The best-known bailout of an individual American company in recent memory is probably the government's effort to keep afloat a near-bankrupt Chyrsler Corp., one of the country's "Big Three" automakers, two decades ago.

On top of a $1.5 billion loan guaranteed by the government in 1980, the United Auto Workers union and Chrysler management agreed to pay cuts totalling $475 and $125 million respectively. But the company never had to borrow the full loan amount and by 1983, its fortunes improving, a reinvigorated Chrysler repaid $800 million in loans.

By comparison, the airline bailout will almost certainly carry a much higher price tag. An argument for enacting it, though, is that many other businesses depend on air transport. In that regard, this bailout more closely resembles the $130 billion Savings and Loan bailout of the early 1990s.

"Clearly, the airline industry is critical to the operation of the economy of this country," says Bingham. "It's just like the S&L's. We could never afford to lose all of those banks and we cannot afford to lose these airlines now."

Still, that argument only goes so far for those who either think the government should stay out of the marketplace, or who wonder why airlines, alone among branches of the travel and tourism business, are getting a big financial boost.

Asked Sen. Peter Fitzgerald, R-Ill., on Thursday: "Who finally will bail out the American taxpayer?"'s Peter Dizikes and Catherine Valenti contributed to this report.

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