Airlines to lay off 40,000 more

Sun National Staff

WASHINGTON - As 40,000 new airline layoffs were announced yesterday and executives warned of looming bankruptcies, industry officials urged Congress to act immediately on a $17.5 billion bailout for the stricken air-travel business.

Republican and Democratic congressional leaders discussed the rescue plan at the White House with President Bush as United Airlines and the parent company of American Airlines said they would lay off about 20,000 employees each.

The latest announcements bring to more than 60,000 the number of job cuts announced in the airline industry over the past week.

US Airways has said it plans to lay off 11,000 employees, and Continental will cut 12,000 jobs. In addition, aircraft manufacturer Boeing Co. has said it might cut as many as 30,000 employees by the end of next year.

Bush called it a "shock" to the economy and said, "We're going to respond."

Of the four planes that were hijacked and crashed in last week's attacks, two were from American and two were from United.

The cuts at American amount to about one-seventh of its work force and will include layoffs at its Trans World Airlines and American Eagle commuter lines.

Fear of more losses

United joined other airlines, including Continental and Delta, in cutting its flight schedule by one-fifth because of an abrupt drop in airline passengers.

Analysts have warned that total layoffs could exceed 100,000, and industry officials fear the industry's financial losses could grow if passengers remain reluctant to take to the air again in the aftermath of last week's disaster.

Lawmakers could act as soon as this week on a $5 billion cash grant to the industry to cover losses suffered since the Sept. 11 attacks.

Action on $12.5 billion in loan guarantees could come within the next few weeks, aides said.

The $17.5 billion package has been reduced significantly from the $24 billion the industry had been requesting earlier this week. No longer included is about $7.8 billion in tax relief, which drew opposition in Washington.

"The terrorists have already scored a short-term victory with the closing down of [Reagan] National Airport," said D.C. Del. Eleanor Holmes Norton, a nonvoting House member.

"We must not give them any victory in the closing down of major airlines and the effect that would have on countless workers and communities," she said.

Liability protection

The airlines want liability protection that would limit the amount of money that they might be forced to pay from lawsuits linked to the terrorist hijackings.

In addition to the 266 passengers and crew members killed in the four hijacked airliners, more than 5,000 people might have lost their lives on the ground in New York and at the Pentagon.

Delta Air Lines Chairman Leo F. Mullin told the House Transportation Committee that Congress should declare the terrorist attack an act of war so the airlines involved "would not be liable for the damage to persons and property on the ground."

Insurance will cover the cost of lawsuits by families of those aboard the planes, Mullin said, but the airlines have been notified of huge increases in their premiums.

"These financial blows are coming fast and furious to an industry that, even in good years, faces intensive capital demands and razor-thin profits, and that was already projecting losses for the year," Mullin told the committee.

Federalizing security

Congress is expected to act soon on separate measures designed to beef up airport and airline security.

But there is still no agreement on the industry's request that the federal government take over the job of screening passengers from the airlines.

One of the leading Republicans in the Senate said he was wary of a federal takeover of airport security, arguing that lesser steps, such as reinforcing cockpit doors and putting armed sky marshals on planes, could be just as effective.

"We might have a greater federal role," said Oklahoma's Don Nickles, the second-ranking Republican in the Senate. "But I'm not sure a total federal takeover is the right way to go."

Democratic Rep. Elijah E. Cummings of Baltimore, a member of the Transportation Committee, is among those who support federalizing airport security.

"There's no reason why federal employees can't do that job," he said. Under the current system, the turnover rate among the security workers hired by the airlines, who are paid minimum wage and given inadequate training, is high, Cummings said.

"I think the only way we are go-

ing to get people to use the airlines again is to convince them it is safe," he said.

Resistance to bailout

Some resistance to the rescue package came from members of Congress who said they want to assist airlines hurt by the terrorist attacks but don't want to bail out those that made bad business decisions before Sept. 11.

"I do not support signing a blank check," said Rep. Robert Menendez, a New Jersey Democrat.

Others raised the issue of executive salaries and bonuses, making it clear that they wanted to keep taxpayer money from going into the pockets of airline executives.

"We want to help the airline industry," Cummings said. "But what about the little guy?"

Among the airlines that had been struggling before last week was US Airways, which employs thousands of flight attendants, pilots, ground personnel and others in the Baltimore area.

It is one of several airline companies that appear to be on the verge of declaring bankruptcy, analysts have said.

One of the airline executives who testified yesterday, Doug Parker of America West, warned that several airlines "would very likely be forced to file bankruptcy in a number of days." He added: "America West is one of those."

In addition to America West, which also serves Baltimore, airlines that have announced job cuts since Sept. 11 include America Trans Air, National Airlines and Virgin Atlantic. Midway Airlines closed down.

Separating the package

One option being considered last night by Congress was to break the rescue package into pieces.

The portion that has the broadest support, the $5 billion cash infusion, would be approved first. Loan guarantees and questions about protecting airlines from lawsuits would be dealt with later, aides said.

Some lawmakers want private lenders to put up a portion of the money for the loan guarantees.

"I believe that we should not be in the government bail-out business," said Rep. Ellen Tauscher, a California Democrat.

"I would much prefer that we let the capital markets take the lead and at least have some commitment from the capital markets for these loan guarantees - up to maybe 20 percent - and then the government could step in," she said.

"That way we'd have a litmus test for viability for you, and a security test for the money that we are going to be putting in for the American people," she told the airline executives.

Delta's Mullin told the committee that "for many airlines, there are no private sources of capital available. Financial liquidity in the industry is poor."

Flanked by executives of four other passenger airlines and FedEx Corp., which flies cargo, Mullin estimated the industry's losses last week at $1.36 billion. Air traffic was shut down for two days after the attacks and a limited number of flights operated for two days after that.

The industry estimates that additional losses by the end of this month will total $3.36 billion. About $300 million in losses by cargo and other carriers would bring the total to $5 billion.

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