=20 ---------------------------------------------------------------------- This article was sent to you by someone who found it on SFGate. The original article can be found on SFGate.com here: http://www.sfgate.com/cgi-bin/article.cgi?file=3D/news/archive/2004/06/03/f= inancial1515EDT0171.DTL --------------------------------------------------------------------- Thursday, June 3, 2004 (AP) Airline executives present dire picture of industry BRAD FOSS, AP Business Writer (06-03) 14:29 PDT WASHINGTON (AP) -- Airline executives complained to lawmakers Thursday that rising fuel cos= ts have undermined a budding industrywide recovery and that carriers cannot afford to pay an additional $435 million in security-related fees sought by the Bush administration. Members of a House transportation subcommittee signaled a willingness to extend war-risk insurance coverage. But they criticized executives for the way they've handled higher fuel costs, and said Congress would not support another bailout of the industry. In the aftermath of the Sept. 11 terrorist attacks, the federal governme= nt has made some $18 billion in cash, security-fee reimbursements and loan guarantees available to the struggling industry, which has lost nearly $25 billion since the start of 2001. "While Congress may assist the airlines with mandated security costs and war risk insurance, let me make it clear that Congress is not going to underwrite losing airline operations," Rep. John L. Mica, chairman of the subcommittee on aviation, told the executives invited to a hearing on the financial condition of the industry. "The airlines now in trouble must be prepared to fend for themselves," said Mica, R-Fla., who noted that several low-cost airlines have managed to report profits, even under the industry's difficult circumstances. Rep. James L. Oberstar, D-Minn. said more airlines should have put fuel-price hedging strategies in place before the war in Iraq started, in anticipation of potentially higher prices, while others said the carriers need to try harder now to pass along the rising costs of jet fuel to their customers. Several executives said attempts to raise airfares have failed because their competitors did not follow suit, forcing them to rescind the increases out of fear of losing customers to rivals. "None of us wants to find out what will happen to load factors and yield= ," said United Airlines chief executive Glenn Tilton, using the industry terms to describe the percentage of seats filled and profit margins. Gordon Bethune, the CEO of Continental Airlines, described the industry's financial condition as "perilous, and the skies are only getting darker. All-time high oil prices and the ever-increasing burden of government taxes and fees are killing the industry." "Unless fuel prices abate, or the revenue environment improves, we will have to furlough employees and seek wage and benefit concessions," Bethune warned. "We may also have to reduce our pension funding." Security costs also are weighing heavily on airlines. As part of the law that federalized passenger screening, Congress ordered airlines to reimburse the government the amount they spent on screening in 2000. The government say it is owed $750 million; airlines put the figure at $315 million -- a difference of $435 million. Bethune said the industry has become "the whipping boy to fund" the Transportation Security Administration, the anti-terrorism agency created after the Sept. 11 attacks to protect America's planes, trains and trucks. Bethune said other sectors of the transportation industry need to pick up some of the costs in the future. Executives also highlighted the steps their companies have taken -- in United's case, through Chapter 11 proceedings -- to operate more efficiently amid fierce competition for budget-conscious fliers. The chief executives of Frontier Airlines and America West Airlines credited the government's loan-guarantee program with helping to turn around their companies' fortunes and putting them on the path to profitability that has eluded many other carriers. Meantime, United's parent, UAL Corp., has yet to learn whether the government will approve its application for a $1.6 billion loan guarantee. Joseph B. Leonard, the chief executive of AirTran Airways, another carri= er that has reported profits, urged Congress not to interfere too much with the free markets and suggested that, for the benefit of the entire industry, some carriers might need to fail. "Anything the government does to subsidize inefficiency and discourage competition will fail," Leonard said, "both for the airlines and for the taxpayers." ---------------------------------------------------------------------- Copyright 2004 AP