=20 ---------------------------------------------------------------------- This article was sent to you by someone who found it on SF Gate. The original article can be found on SFGate.com here: http://www.sfgate.com/cgi-bin/article.cgi?file=3D/chronicle/archive/2003/03= /26/BU220231.DTL ---------------------------------------------------------------------- Wednesday, March 26, 2003 (SF Chronicle) BEGGING FOR A BAILOUT/PASSENGERS STAYING HOME: Desperate airlines pin hopes= on a proposed $4 billion from the government to avert financial ruin David Armstrong, Chronicle Staff Writer The chances for a federal aid package for the battered airline industry improved slightly Tuesday but the level of funding is still very much in dispute. "I think it is likely that either in supplemental or some other form, relief will be given to the aviation industry," Senate Majority Leader Bill Frist, R-Tenn., told reporters. He didn't say when or how much. However, an official close to discussions between the Bush administration and airline officials told the Associated Press the White House is not inclined to support a major bailout. Instead, Bush believes that the airlines must go through a restructuring process and let market forces determine which carriers will survive, the official said. The cash-strapped industry is nervously awaiting a decision from the Whi= te House. U.S. carriers have asked Washington to cover $4 billion in additional security costs incurred since the Sept. 11 terrorist attacks; tap the Strategic Petroleum Reserve to help defray high fuel costs; and lift taxes that add to the price of airline tickets. The industry's financial situation is bleak. Delta, Continental, Northwe= st and United airlines have dropped flights from their schedules and trimmed staff. United filed for Chapter 11 bankruptcy protection in December. The improved chances for a relief package helped push up airline stocks Tuesday. Shares of UAL Corp., United's parent company, rose 2 cents on the New York Stock Exchange on Tuesday, to close at 85 cents per share. Northwest rose 72 cents, or 9.8 percent, to $8.08 Tuesday in Nasdaq Stock Market trading. AMR, the world's largest airline company, rose 17 cents, or 8.2 percent, to $2.25 and Delta gained 29 cents, or 3.1 percent, to $9.81 on the New York Stock Exchange. Frist's support came a day after Transportation Secretary Norm Mineta met with other Bush administration officials to discuss federal aid for the nation's airlines, which have lost $30 billion since mid-2000 and are on course to drop $10.7 billion this year. Said Transportation Department spokesman Bill Mosley: "The administration is focused on this issue and is in daily contact on a variety of options. There is nothing firm at this point. We are not favoring any one plan." He said his department is "ready to move quickly" should Congress or the White House decide in the coming days or weeks to aid the airlines. Some observers describe the airlines' dilemma as the worst crisis in commercial aviation since World War II, when the industry was much smaller and far less important to the national economy. Mineta, a former mayor of San Jose and the only Democrat in President Bush's Cabinet, favors airline relief. The drive has picked up support from airline workers who are often at loggerheads with management over how to address the crisis. LEAFLET CAMPAIGN United Airlines flight attendants handed out leaflets in favor of federal aid Monday at major airports, including San Francisco International Airport. On Tuesday, the pilots union implored Washington to step in. "This week, many of our brother and sister pilots will petition Congress for emergency relief from the crushing taxes and costs of security levied on the airline industry since the tragic events of 9/11 and heightened since the beginning of the war in Iraq," said Air Line Pilots Association Chairman Paul Whiteford. The industry is organizing a lobbying effort this week to press for aid, AMR chief executive Don Carty said. "I urge you to contact your senator or representative to ask for their help," he said in a message to employees. Despite the crescendo of support, there is also substantial opposition to an aid package among some of Mineta's fellow Cabinet officers and members of Congress. Critics say that aiding the airlines when the president is proposing a $74.7 billion bill to cover the initial cost of the war with Iraq, on top of a $5 billion package that the airline industry received after the Sept. 11 attacks, is not affordable. There is also sentiment in favor of allowing weak carriers to fail so the industry can reorganize and emerge from the crisis streamlined and strengthened. Contributing to the industry's problems are low fares for leisure travelers and cutbacks by business travelers. Of 123 major U.S. corporations surveyed last week by the Business Travel Coalition, 21 percent said they have banned all international travel for the foreseeable future, due to the war. "I would say the way things are going in Iraq, that ban is not going to = be lifted soon," said the business group's chairman, Kevin Mitchell. The war-driven slump probably will hurt the airlines even more than the tailspin after the Persian Gulf War in 1991, Mitchell said. "In those days, the alternatives to air travel were the telephone and ve= ry inefficient, very expensive video conferencing. Now, you're surrounded by cheap, high-quality video conferencing, mobile phones and the Internet. You don't have these salesmen sitting around with angst, saying 'I've got to be out there.' " Shrinking demand for air travel has caused airlines to cut service. Delta Air Lines, the nation's third-largest carrier, said Monday it would shrink its network by about 12 percent, reducing service both domestically and internationally as a result of fewer travelers since the onset of war in Iraq. The cutbacks at Delta followed similar moves last week by United, Continental and Northwest, which said it will lay off 4,900 employees and trim its flight schedule by 12 percent. FEWER FLIGHTS United, which has been attempting to reorganize under Chapter 11 since December, said it will cut service by 8 percent. It will trim 104 domestic flights on April 1 and 20 international flights on April 6, but will not abandon any routes. On Monday, United's machinists union pledged to fight United's plan to temporarily shut down an Indianapolis maintenance center where job reductions are set to start this week. The International Association of Machinists told members it will file an injunction to stop the closing. The union represents 1,148 mechanics at the Indiana facility; 468 of the workers are scheduled to begin unpaid leave this week and the rest on April 15. United also maintains a maintenance plant at SFO. United spokesman Chris Brathwaite said the airline has no plans to close its San Francisco facility. Chronicle news services contributed to this report. / E-mail David Armstrong at davidarmstrong@xxxxxxxxxxxxxxxx=20 ---------------------------------------------------------------------- Copyright 2003 SF Chronicle