NYTimes.com Article: 2 Airline Executives Say Industry Needs More U.S. Aid

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2 Airline Executives Say Industry Needs More U.S. Aid

January 10, 2003
By ELIZABETH OLSON






WASHINGTON, Jan. 9 - Two of the nation's biggest airlines
told Congress today that they were searching their
operations for cost cuts but still needed government help
to pay for new security measures and to tackle their single
largest expense: labor.

The largest airlines lost about $9 billion last year,
according to the Department of Transportation, as they
struggled to adjust to fewer passengers and greater
security challenges. Congress gave the industry $5 billion
immediately after the terrorist attacks.

But executives from two large airlines testified today
before the Senate Commerce, Science and Transportation
Committee that the industry might need an additional $4
billion to help it through its financial crisis.

"We have the responsibility to right our own ship," said
Richard H. Anderson, chief executive of Northwest Airlines,
but "the reality is that there are significant security
burdens," including the costs of installing stronger
cockpit doors, as well as other costs that the airlines
have incurred since the terrorist attacks. Stringent cuts
and layoffs allowed Northwest to return to profitability in
the third quarter, he said.

Today's hearing was the first of several examining the
problems of the industry and whether the federal government
should extend additional financial assistance.

Some lawmakers, including Senator John McCain, the Arizona
Republican who is the new committee chairman, were
reluctant to pledge any new money, even though they
stressed that they wanted services to smaller cities to be
maintained.

Mr. McCain agreed with airline executives at the hearing
that the industry's troubles were deeper than those of
previous downturns and that structural changes were needed
in an industry that is effectively two-tiered, including
the bigger carriers and the smaller discount carriers.

Mr. McCain is considering whether to reintroduce
legislation that would set up an arbitration panel to
quickly and definitively resolve airline labor disputes.
His proposal would speed up the current process, which
allows for lengthy mediation and the possibility of
strikes.

Mr. McCain's proposal would allow arbitrators to consider a
carrier's financial condition, including a "reasonable
profit," before making a decision after 30 days.

The largest airlines want to see the legislation revived
because they say the current process has led to an
unsustainable level of wages and benefits. They have formed
an organization to help shape a grass-roots campaign to win
support for rewriting the airlines' labor rules.

Mr. McCain's bill was not passed last year, but, if it was
reintroduced, it could receive a more favorable response
now that the Republicans control Congress.

Donald J. Carty, chief executive of American Airlines, a
unit of the AMR Corporation, said that revising the airline
labor law "would not help us through the current crisis."
But he called it a long-term tool to assist the airlines
"once we get healthy, to keep healthy."

Duane Woerth, president of the Air Line Pilots Association,
which represents 66,000 pilots, told the committee that
binding arbitration was unnecessary because there had been
few strikes in the airline industry.

Compulsory arbitration "would remove all collective
bargaining rights," he maintained.

"The current system produces contracts about 99 percent of
the time, so we only have a strike every 10 years," Mr.
Woerth said. Airlines favoring such arbitration maintain
that the true figure is much higher: about 160 strikes in
the last 50 years.

Mr. Carty also said his airline would begin to re-examine
its labor contracts, a process he hoped to start within 60
days.

"It won't be easy because it involves changes, and changes
our employees won't necessarily embrace," he said.

http://www.nytimes.com/2003/01/10/business/10AIR.html?ex=1043208192&ei=1&en=0a5069611647bd3e



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