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Should the U.S. keep bailing out airlines? Here's a post-9/11 success story — plus a cautionary tale
By SALLY B. DONNELLY/PHOENIX
Monday, Nov. 24, 2003
Remember the airline bailouts following 9/11? Less than a month after the 2001 attacks, Congress rushed through a $15 billion bounty of subsidies and loan guarantees for U.S. carriers — which suffered catastrophic human and business losses that day and the next two. Washington first forked over money for anything that could be linked to 9/11, then paid out $1.5 billion in assistance to five airlines that claimed to be on the verge of extinction.
Since then, the bailout program has been widely criticized as wasteful, in part because it was clear prior to 9/11 that the airline industry had too much capacity and some carriers were in trouble. In this capitalism-without-a-parachute view, the demise of a carrier or two was inevitable and the attacks, however brutal, served to accelerate that process.
But the full story of the bailouts is more complicated — and more interesting. To judge their effectiveness, it helps to look at two airlines that received assistance and whose fortunes have dramatically diverged since those frantic days. America West, which was among the nation's most inept airlines, has used its $380 million in federal loans to transform itself into an innovative industry leader. Another inefficient carrier, US Airways, got nearly $1 billion — the government's largest aid package — and stayed inefficient. US Airways is in such poor shape that some analysts expect another bankruptcy. With the government's big-airlines record at 1-1, the issue of federal assistance is looming again. Bankrupt United Airlines will, for the second time, soon ask Washington for an aid package, this one totaling $1.8 billion.
http://www.time.com/time/magazine/article/...-549004,00.html
Should the U.S. keep bailing out airlines? Here's a post-9/11 success story — plus a cautionary tale
By SALLY B. DONNELLY/PHOENIX
Monday, Nov. 24, 2003
Remember the airline bailouts following 9/11? Less than a month after the 2001 attacks, Congress rushed through a $15 billion bounty of subsidies and loan guarantees for U.S. carriers — which suffered catastrophic human and business losses that day and the next two. Washington first forked over money for anything that could be linked to 9/11, then paid out $1.5 billion in assistance to five airlines that claimed to be on the verge of extinction.
Since then, the bailout program has been widely criticized as wasteful, in part because it was clear prior to 9/11 that the airline industry had too much capacity and some carriers were in trouble. In this capitalism-without-a-parachute view, the demise of a carrier or two was inevitable and the attacks, however brutal, served to accelerate that process.
But the full story of the bailouts is more complicated — and more interesting. To judge their effectiveness, it helps to look at two airlines that received assistance and whose fortunes have dramatically diverged since those frantic days. America West, which was among the nation's most inept airlines, has used its $380 million in federal loans to transform itself into an innovative industry leader. Another inefficient carrier, US Airways, got nearly $1 billion — the government's largest aid package — and stayed inefficient. US Airways is in such poor shape that some analysts expect another bankruptcy. With the government's big-airlines record at 1-1, the issue of federal assistance is looming again. Bankrupt United Airlines will, for the second time, soon ask Washington for an aid package, this one totaling $1.8 billion.
http://www.time.com/time/magazine/article/...-549004,00.html
