Airline Bailout: How Big, How Crucial?

N E W   Y O R K, Sept. 21 -- America's airlines seem likely to receive a hefty bailout from Congress this week. But is the multibillion-dollar package necessary?

In the wake of the Sept. 11 terrorist attacks on the United States, in which four airplanes were hijacked and crashed, prospects for the industry look bleak.

With tourists and business travelers expected to shy away from the suddenly unfriendly skies, domestic carriers have already announced almost 100,000 layoffs and reduced their schedules, while the major airlines' stock prices have plummeted this week.

But some industry observers are not convinced that the rapidly constructed financial windfall for the airlines has to be put in place at this point.

"I don't know whether it's justified yet because we don't know how many people are going to quit flying," says Richard Bingham, professor of urban studies at Cleveland State University.

Cash Flow Problems

That's not what airline executives have been saying, though. Industry leaders have not been shy about lobbying for an aid package, and requested $24 billion in cash and loans during meetings with Congress this week.

"We are in very urgent need of a financial infusion, very, very quickly," Delta Air Lines CEO Leo Mullin said Wednesday.

But the House and Senate both passed a $15 billion package today consisting of a $5 billion cash payment to the industry, with a potential $10 billion or so in guaranteed loans if problems persist, and a lessening of liability costs for American Airlines and United Airlines, whose planes were hijacked on Sept. 11.

The government's aid will also probably include $3 billion in security costs not included in the cash grant or loans.

Although less than their desired figure, the plan would address the most pressing problem the airlines are facing at the moment: cash flow. Compared to some other industries, the major airlines do not keep a great deal of cash on hand — usually anywhere from three weeks to three months of reserves. Even the grounding of all flights for about two days last week cut into those reserve substantially, analysts say.