Delta CEO: Govt should help airlines
From Patty Davis
WASHINGTON (CNN) -- Delta Air Lines CEO Leo Mullin said Wednesday financially troubled airlines need government help -- and now.
The reduction in U.S. air travel caused by the war with Iraq has intensified losses for the already-struggling airlines. In the past week, most of the major carriers have cut domestic and international flights and jobs.
The Air Transport Association, the industry's trade association, recently predicted a war with Iraq would cause the industry to lose $10.7 billion this year, cut 70,000 jobs and could spur more airline bankruptcies. The ATA is expected to release an update on the airlines' economic picture later Wednesday.
In a speech to the Wings Club in New York, Mullin reiterated his appeal for the federal government to pick up the multibillion-dollar tab for aviation security, such as stronger cockpit doors and other measures. The airlines say it's costing them $4 billion a year, an amount they can't afford.
"These costs," Mullin said, "are not the airlines' responsibility. Instead, as part of the nation's war on terrorism, they appropriately fall under the category of national defense, to be funded by the government."
And Mullin complained that the industry is also forced to pay a disproportionately high level of taxes as compared with other industries -- taxes on things such as jet fuel.
"While the industry could, in more prosperous times, absorb these high rates, such is no longer the case," he said.
While Delta has said it won't go bankrupt, it is clearly struggling. The war with Iraq has weakened passenger demand. Last week, Delta announced it is cutting flights by 12 percent. In an SEC filing Tuesday, Delta said it expects to lose more than the $397 million it lost in the same period last year. The airline lost $1.3 billion over the entire year.
Mullin's appeal for government aid comes after Delta revealed in a filing with the Securities and Exchange Commission that it awarded its top executives millions in bonuses last year. Mullin received a $1.4 million bonus. The airline also moved to make sure the pensions of top executives are safe if the company does file for bankruptcy sometime in the future.
United Airlines, already in bankruptcy, has announced it is cutting domestic and international flights by 6 percent starting in April and putting an unspecified number of employees on authorized no-pay status. United spokesman Joe Hopkins said the airline's international bookings have fallen 40 percent from a year ago and domestic bookings are down significantly in recent weeks.
United said it is making progress in talks with its unions as it works to emerge from bankruptcy.
Continental has also cut routes. Northwest Airlines last week announced it will have 12 percent fewer flights and is cutting 4,900 jobs.
Tuesday, Senate Majority Leader Bill Frist said he expects Congress to pass legislation to help airlines that are suffering from the war with Iraq.
Frist said he is unsure if the airline aid will be tacked on to the supplemental budget bill or other legislation.
Some members of Congress say they are considering steps such as helping with the airlines' war risk insurance, allowing the airlines once again to apply for loan guarantees and giving a temporary reprieve from the jet fuel tax.