Airline Bailout

Never underestimate the flexibility of corporate executives who run the nation’s major air carriers. Last week, they slammed file cabinet drawers shut on their favorite speeches about the glories of free markets and the horrors of government intervention, and marched to Capitol Hill, hats in hand to ask the Congress for multi-billion dollar handouts of taxpayers’ money. Suddenly, the federal government—so often demonized by the airlines public relations machine—had become a bosom buddy.

It was a well-timed move on the Treasury. In the wake of the suicide attacks on New York and Washington, the federal government had ordered a two-day halt to air traffic—a shutdown that admittedly hurt earnings of all airlines—and the income of thousands of workers. But, the bailout demands far exceeded anything that could be attributed to the brief stoppage of flights.

In fact, long before the first plane slammed into the World Trade Center, the airline industry had been in economic trouble. Business travel was down and airlines had run up huge debts in buying expensive jets and, like many other industries, faced high fuel costs.

Senator Ernest Hollings, Democrat of South Carolina, scoffed at the idea that the bailout was justified by the attacks on September 11.

“The airlines told us they were going broke long before these attacks occurred while at the same time giving their executives $120 million in salaries and bonuses this year,” Senator Hollings said.

But Senator Hollings’ comments were pushed aside as Congress voted five billion dollars in grants to air carriers and provided for up to $10 billion in loan guarantees plus government payment of “terrorism-related” lossesabove $100 million and reimbursement for insurance premium increases that the airlines face.

As the bailout was voted, the layoffs of airline employees were approaching 100,000, but Congress refused to include benefits for these workers in the bailout package. Even an effort to have health insurance continued for the laid-off workers was rejected. There were some half-hearted suggestions that Congress would return to the problems of the workers later. [At least one airline–Southwest– which has consistently outperformed its bigger rivals, has managed so far to maintain its “no layoffs” record despite a big drop in passengers in the post-attack period.]

As the efforts to help laid-off airline workers were tossed aside, Representative Jay Inslee of Seattle shouted to his colleagues in the House of Representatives: “Why in this chamber do the big dogs always eat first?”

With the exception of some smaller and regional carriers, the corporate executives are taking the bailout money from the taxpayers without a thought of cutting their own salaries. A Wall Street Journal reporter—Susan Carey—who surveyed airline salaries came up with this report:

“…it is difficult to find a big carrier whose top executives are yet sharing the pain by cutting their own compensation, although such a move would have obvious symbolic value and actually could save some serious money.”

The airline industry’s swift and successful move for bailouts in the aftermath of the attacks is not the first nor the last time that the flag or a sagging economy will be used to prop up ailing corporations. If the economy continues to falter, look for other corporations to follow the example of themajor air carriers. Already, there has been talk of insurance industry plans for tax breaks or similar benefits. The nation will be told that new tax cuts—like a reduction or elimination of the levy on capital gains—are necessary to spur the economy when its only real purpose would be to sweeten the financial pot for a handful of the most wealthy citizens. (the wealthiest one percent have financial wealth equal to the combined financial wealth of the bottom 95 percent of Americans)

Similarly, economic downturns may become the rationale for assaults on the environment like a renewed push to drill for oil in the Arctic refuge. More corporate welfare—masked as an economic necessity—will be on a front burner. And, as in the airline bailout, the needs of workers employed by these corporations will at best be postponed or, more likely, never considered.

America can do better. Thousands of firemen, policemen, rescue workers and ordinary citizens at the World Trade Center in New York and the Pentagon in Washington proved that on September 11. They rose to the occasion, took risks, some sacrificing their lives in reaching out to help others…citizens helping citizens. It was a remarkable demonstration to the world of how great we can be as a people willing to sacrifice without thought of reward or personal safety.

Leaders—in both President Bush’s Administration and in the Congress—have a responsibility to make certain that their political and economic decisions build on the spirit of these sacrifices. That may mean tougher tests for the demands of special interests—more rigorous tests than the bottom line of corporate profits.

It means Members of Congress have to stand up and take risks. Senator Peter G. Fitzgerald Republican of Illinois demonstrated some of that kind of courage when he cast the lone dissenting vote as the airline bailoutpassed the Senate, 98 to 1. Here is the way he defended his vote:

“Congress should be wary of indiscriminately dishing out taxpayer dollars to prop up a failing industry without demanding something in return for taxpayers.”

The corporate bailouts will keep coming, making Uncle Sam the guarantor of big business. Will the elected representatives from the White House to Capitol Hill have the courage to resist?

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