This article from NYTimes.com has been sent to you by psa188@juno.com. Powerful Allies Lobbying Hard for United Aid November 27, 2002 By RICHARD A. OPPEL Jr. with MICHELINE MAYNARD WASHINGTON, Nov. 26 - An intense lobbying battle has broken out over whether to award $1.8 billion in federal loan guarantees to United Airlines, with the House speaker, J. Dennis Hastert, aggressively supporting the airline's cause. United's main competitors, meanwhile, are asking government officials to reject the guarantees, which they call inappropriate aid for a mismanaged airline and a waste of taxpayers' money. The bipartisan lobbying on behalf of United has reached all the way to the Oval Office. Mr. Hastert, a Republican from United's home state, Illinois, has recently made pleas to President Bush; the Federal Reserve chairman, Alan Greenspan; Treasury Secretary Paul H. O'Neill; and Andrew H. Card Jr., the White House chief of staff. On Monday, Mr. Hastert placed calls to all three members of the federal Air Transportation Stabilization Board, which has the final say on the guarantees, according to a government official close to the matter. A spokesman for Mr. Hastert said the speaker had argued that the airline industry would be devastated if United did not get the guarantees. The airline, the second largest in the nation, has warned that it will seek bankruptcy court protection without the federal aid. Battling United are executives of rival airlines. Armed with spreadsheets, they have trouped to the ninth floor of a nondescript office building in downtown Washington to deliver a different message to the air transportation board. A bailout, they say, would hurt the rest of the airline industry while flushing away almost $2 billion of taxpayers' money. After the Sept. 11 terrorism attacks, Congress passed a package of aid for the ailing airline industry and created the federal board, with Bush administration officials in two of its three slots. Industry officials say they expect the board to decide about United soon, and the lobbying has been accelerating as the Thanksgiving weekend approaches. The airline industry is expected to lose at least $7 billion this year because of diminished travel and additional security costs. United was ailing even before the attacks, but it is hard to gauge whether it would have ultimately reached such a desperate point without the September shocks and the economic fallout. Officials of United's parent, UAL, have said that the airline will have to seek bankruptcy protection if it cannot make or extend a $375 million debt payment that is due Monday and if it does not quickly receive the loan guarantees. Mr. Hastert has plenty of reason to back United, as his district is near the airline's suburban Chicago headquarters. Mr. Hastert has another close connection to the company: United hired Daniel J. Mattoon, a longtime political adviser and confidante of the speaker, to lobby for the loan guarantees. United has a bipartisan stable of other well-connected lobbyists and consultants, including Bud Shuster, the former Republican congressman from Pennsylvania who was the House transportation chairman; and the Duberstein Group, where Michael Berman, a longtime Democrat and one of Washington's top lobbyists, is counseling United. Dozens of others have lobbied on behalf of the airline, including Mayor Richard M. Daley of Chicago, a Democrat who has been in contact with the executive director of the federal air board. Senator Richard Durbin, Democrat of Illinois, has called Mr. O'Neill and high-ranking Transportation Department officials to press United's case. United's unions have flooded the board with 42,000 letters and e-mail messages pleading for the loan package. United's major competitors have undertaken their own countereffort to convince the board and Bush administration members that the airline has not made cuts deep enough to merit the financial aid. They argue that United would be headed for bankruptcy court even if the Sept. 11 attacks had never happened. A few executives have publicly challenged United's application. Continental Airlines' chief executive, Gordon M. Bethune, said on CNBC a few days ago that taxpayers should not "subsidize this loser." The most aggressive lobbying has been before the air transportation board. Some carriers - including American Airlines, part of AMR; Continental; and Northwest Airlines - have submitted their own analyses of United's financial condition. Those reports challenge the idea that United's recent cost-cutting will keep it afloat if it gets the loan package. Some industry officials also say that competing airlines may go to court to try to reverse a government award to United. American, the nation's largest airline, has met with the staff of the board and "given them some pretty in-depth analyses of what we believe United's financial position was" when it applied for the guarantees, said Tim Doke, the vice president for corporate communications at American in Fort Worth. "We tried to make a pretty detailed case that United had serious business issues well in advance" of Sept. 11, he said. "United simply doesn't qualify" for the guarantees, he added, in part because its financial problems began before the attacks, and, he said, because it should have been able to raise money through other means. United accuses its competitors of circulating inaccurate information that unfairly casts doubt on its financial viability. United officials and its union leaders say they have made deep, meaningful cuts in the airline's cost structure that will allow it to survive if it gets the loan guarantees. That includes what the airline says are $1.5 billion in wage concessions that will be voted on by its machinists union members on Wednesday. The vote results are not expected until late Wednesday. "United is a classic example of why this legislation was passed," said Mr. Shuster, the United lobbyist and former House member. "It has the asset base to provide the assurance that the money is going to be repaid." Efforts by other airlines to quash the aid package are understandable, Mr. Shuster said. "They'd like to hurt their competition," he said. It is not yet clear what the air transportation board will do, or whether the political pressure will help United. Three weeks ago, the board told United that it needed more information, including "further explanation of the assumptions underlying the revenue forecasts" in the airline's business plan. Today, the board unanimously rejected loan guarantees totaling about $15 million for two small carriers, Medjet International and Corporate Airlines, saying neither had shown "reasonable assurance" that the loans would be repaid. In all, the board has approved guarantees, or conditional guarantees, for five carriers, including US Airways and America West, while rejecting requests from six applications, including the two from small carriers today. After it rejected National Airlines' request earlier this year, the airline shut down. A White House spokeswoman, Claire Buchan, said that neither Mr. Card nor President Bush had called the board's staff or board members or taken any other action in response to Mr. Hastert's entreaties. "Our view is that the board members should make these decisions on the merits, based on the financial information that is available to them," Ms. Buchan said. One White House staff member explained that while "Speaker Hastert has been enlisted to push as many buttons as possible on behalf of United," the administration still had concerns about interfering with the free market. "It puts us in a situation of picking winners and losers," the staff member said. The three members of the loan-guarantee board - a Treasury under secretary, Peter R. Fisher; a Federal Reserve governor, Edward M. Gramlich; and the general counsel of the Transportation Department, Kirk K. Van Tine - declined to comment, their aides said this week. A spokeswoman for the board said that "there is no time frame" for a decision. Mr. Greenspan selected Mr. Gramlich to serve in his place, while the Treasury and Transportation Departments named their representatives on the board. Frederic Brace III, United's chief financial officer, has met numerous times with the staff of the board and the board's members in the last few weeks. He said he was frustrated by competitors' efforts to mischaracterize United's finances. "We would be happy to have the debate occur over the facts of the situation and not over the perception of the situation," he said, "but we are forced by our competitors and pundits to deal with perception." Mr. Brace said the debate over the guarantees had become polarized. "In some camps, the debate is what should the airline industry look like, and in other camps they're just trying to apply the law," he said. "It isn't clear which camp is going to prevail." http://www.nytimes.com/2002/11/27/business/27AIR.html?ex=1039407063&ei=1&en=b007593d86fdaf1b HOW TO ADVERTISE --------------------------------- For information on advertising in e-mail newsletters or other creative advertising opportunities with The New York Times on the Web, please contact onlinesales@nytimes.com or visit our online media kit at http://www.nytimes.com/adinfo For general information about NYTimes.com, write to help@nytimes.com. Copyright 2002 The New York Times Company