The US Congress agreed in principle yesterday to a White House request for a $15 billion (€16.4 billion) package to bolster the airline industry as some leading airlines struggle to survive following last week's terrorist attacks. The airlines had sought $24 billion.
The progress of the emergency measure through the Senate and House of Representatives yesterday was delayed, however, as Democratic leaders protested that it contained no provisions for the 100,000 workers expected to be laid off as airlines cut services and routes, or other affected industries such as hotels and restaurants.
Some key Republicans were also unhappy with provisions that would limit the liability of American Airlines and United Airlines for the death and destruction on the ground caused by the attacks using their hijacked aircraft. The Bill would allow victims and their relatives to seek compensatory damages for lost wages, health bills, pain and suffering but would bar punitive damages.
The legislation is likely to include some limitation on the huge legal liability facing the industry, including a proposal that would ensure that the government shoulders a portion of the costs of payments to victims in return for airlines keeping some unprofitable rural routes open. Airlines face a huge increase in insurance premiums and reduced coverage from insurance companies. The plan would also create a government-supported "relief fund" through which victims and their families could receive payments if they do not sue the airlines.
The White House is also suggesting that government become the nation's insurer of last resort. This "terror insurance" could be extended to other industries. The draft bill would provide the "war risk" insurance for the next six months for domestic flights that would not otherwise be available. Without it, airline executives warned that planes would have to be grounded.
The relief plan for the airlines includes $5 billion in direct grants over the next nine months and $10 billion in loan guarantees. It was agreed after a late-night negotiating session on Thursday involving Democrat and Republican leaders and White House officials after President George W Bush's address to the joint houses. Mr Bush promised in his address that "we will come together to promote stability and keep our airlines flying with direct assistance during this emergency". Democrat Senator Edward Kennedy and House Democrat Majority leader Richard Gephardt sought provision for worker retraining, job assistance and continued access to healthcare for workers laid off.
Another concern expressed by some senators was that the aid package should not be used to prop up airlines that were failing before September 11th.
The White House and Congress have also agreed to use $3 billion from an earlier $40 billion disaster package to help cover the costs of tighter aviation security.
The urgency of the measure was underlined by the investment firm Morgan Stanley which wrote to US Treasury Secretary Paul O'Neill to warn there would be no functioning capital markets for the airline industry unless the government provided "relief from what would surely be bankruptcy-inducing liability claims against carriers for collateral damage and loss of life" from the attacks.
Delta Air Lines director of risk management, Mr Chris Duncan, told the Wall Street Journal that last year Delta paid $1 million to $2 million for the portion of its insurance that covers war and terrorism risks. Based on a proposed new surcharge of $1.25 a passenger, Delta would have shelled out $148 million for such coverage, based on carrying 119 million passengers. "We don't have that kind of money for the insurance," Mr Duncan said.
