Loan guarantee program mostly untapped By Barbara De Lollis, USA TODAY Most of the $10 billion in the federal loan guarantee program created to=20 aid airlines after Sept. 11 is untapped as the June 28 deadline for=20 applications nears. An 11th-hour scramble is still possible. United=20 Airlines CEO Jack Creighton said Wednesday that United will apply if it can= =20 negotiate cost-saving concessions from labor unions in time. American Trans= =20 Air, perhaps this week, expects to ask the government to guarantee $148=20 million in financing, says CFO Ken Wolff. So far, the board overseeing the= =20 program has approved one application =97 worth $380 million to America West= =97=20 and rejected applications for guarantees totaling $22 million from small=20 carriers Vanguard Airlines and Frontier Flying Service. Four applications,= =20 including one from US Airways for a $900 million guarantee, are pending. A loan guarantee is a promise by the government to pay the lender if the=20 airline defaults on the loan, making the airline a better loan risk for=20 lenders. "A lot of it probably will stay on the table," says Susan=20 Donofrio, airline analyst at Deutsche Bank. "I don't expect anywhere near=20 $10 billion" to be used. Continental, Southwest and Alaska airlines say=20 they won't apply. Delta says it has no plans to apply. American won't=20 comment, but industry analysts say they doubt the USA's biggest carrier=20 needs help obtaining a loan. Northwest says it hasn't made a decision. Airline executives and industry analysts say airlines aren't making full=20 use of the program because: =B7 They're getting financing elsewhere. Since the program was= created,=20 airlines have made use of other options to raise money, Donofrio says,=20 citing the success of JetBlue's initial public stock offering and Delta's=20 $1.3 billion bond sale to finance new airplanes. United, she says, is=20 burning less than $5 million a day in cash compared with $10 million a day= =20 soon after the attacks. =B7 They're wary of government involvement. When the loan board voted= =20 to back 85% of America West's $429 million financing package, it required=20 that the government receive rights to buy stock as compensation for the=20 risk it was taking in guaranteeing the loan. That could give the government= =20 a third of the airline's shares, but they would not carry voting rights. =B7 The requirements are tough. Regulations require the board to give= =20 favorable consideration to applications that include cost reductions from=20 labor and other stakeholders and a strong business plan. Demonstrating=20 ability to repay the loan counts heavily, too, and that was a factor in the= =20 board's rejection of Kansas City-based Vanguard's application. Sen. Kit Bond, R-Mo., who has been trying to help the airline secure a loan= =20 guarantee, says the board's decision was contrary to Congress' intent in=20 creating the aid program. "That was not the purpose. We wanted to throw a=20 lifeline to airlines specifically like Vanguard," he says. Airline CEOs say= =20 that slight participation doesn't mean that the program was a failure.=20 Delta CEO Leo Mullin says the program's existence alone helped airlines=20 raise money because it signaled to financial markets that the government=20 would stand behind them. The owner of Roger's Trinbago Site: Roj (Roger James) *************************************************** escape email mailto:ejames@escape.ca Trinbago site: http://www.tntisland.com CBC Website http://www.tntisland.com/caribbeanbrassconnection/ The Trinbago Site of the Week: (Robbie Greenidge) http://www.steeldrumband.net/greenidge/ (Robert Greenidge - Pan Arranger/Composer/Player) courtesy of Roj Trinbago Website & TnT Web Directory Roj's Trinbago Website: http://www.tntisland.com TnT Web Directory: http://search.co.tt *********************************************************