[Congressional Record Volume 147, Number 131 (Wednesday, October 3, 2001)]
[Senate]
[Pages S10144-S10145]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]




                   THE FUTURE OF THE AIRLINE INDUSTRY

  Mr. WYDEN. Madam President, less than 2 weeks ago, legislation 
providing $15 billion to the airline industry flew through the Congress 
like a runaway express. The legislation moved so quickly that I am of 
the view that additional steps are needed to impose accountability on 
the airlines for this unprecedented infusion of taxpayer money.
  One-third of the $15 billion is already on its way out the door of 
the U.S. Treasury and will be given to the carriers according to a 
formula that they sought. Saturday is the deadline for deciding the 
basic process and rules for apportioning the remaining $10 billion in 
loans and loan guarantees. The way this staggering sum of money is 
allocated will shape the structure of the airline industry for years to 
come.
  Yesterday the Wall Street Journal reported that the larger and 
financially healthier airlines have attempted to impose their terms for 
the $10 billion in loan guarantees on the smaller and the weaker 
carriers. If the Office of Management and Budget acquiesces to the 
demands of the larger carriers, it could crush the smaller airlines in 
the short term and squash significantly the hopes of competition and 
consumer choice in the long run.
  On the horizon of the aviation industry there may be only two or 
three carriers dominating routes, dictating prices, and reducing 
service to small and usually rural markets. It is for this reason that 
I come to the floor today, and I intend to outline several principles 
that I believe the Congress should insist upon in order to keep an eye 
on shaping the future of this industry so that there is real 
competition, affordable prices for consumers, and adequate service 
across this country.
  It is obviously critically important to focus on the short-term needs 
of getting people traveling again on those near empty planes and 
restoring consumer confidence. But it is just as important to put in 
place policies that protect the long-term interests of the flying 
public and the taxpayer.
  The $10 billion package of loans and loan guarantees is going to 
dramatically reshape the industry for years to come. On the question of 
competition, on whether flights are affordable, and whether rural areas 
are turned into economic sacrifice zones, the decisions that are going 
to be made in the next few weeks will have a dramatic impact.
  The entire Senate understands that there is a national airline rescue 
effort underway. Since September 11, Congress has heard much from the 
airline industry about what the industry believes needs to be done. 
Congress has responded. It is time now for the Congress to set out what 
the American people have a right to expect from the airline industry. 
Fortunately, this job is going to be easier because the Comptroller 
General, David Walker, and the Department of Transportation Inspector 
General, Ken Mead, are in place in order to provide a crucial reality 
check. Already Mr. Walker has performed an important service of pulling 
together a General Accounting Office team, getting me and other Members 
of the Senate a sense of what the industry's loss projections are, and 
particularly an analysis of their short-term needs. This type of 
independent third-party review is going to be essential in the weeks 
and months ahead.
  Let me give the Senate just a few examples of the important questions 
that the public has a right to have debated

[[Page S10145]]

now, in order to know to what the end product of this debate 
involving the $15 billion is going to lead. For example, suppose that 
the $10 billion in loan guarantees is allocated in a way that favors a 
few large carriers, which is something that is being sought by some in 
the industry. The end result could be consolidation to just a couple of 
airlines, precisely the result the Government was trying to avoid when 
it blocked the proposed United-US Airways merger. Or suppose carriers 
use loan guarantees to strengthen their operations in ``fortress hubs" 
while pulling back elsewhere. The end result for many consumers would 
be a monopolistic environment with little competition and few choices.

  Of course, there is the risk that taxpayer dollars will be wasted on 
airlines that may not survive in any case or on airlines that really do 
not need the help. Care has to be taken to ensure that these dollars 
are used to get the maximum for the American public.
  Responsibility for avoiding these pitfalls lies, in the first 
instance, with the Air Transportation Stabilization Board. The Board 
has the authority to decide who will receive loan guarantee assistance 
and subject to what terms and conditions. The Congress, unfortunately, 
has not provided this Board with a lot of guidance. The legislation 
provides only general criteria, such as the requirement that the loan 
in question be prudently incurred. Congress has not told the Board 
where to place its priorities or what the goals should be. Therefore, I 
believe some guiding principles are needed with respect to how that $15 
billion is allocated. I propose the following principles this morning:
  First, Government assistance must be allocated in ways that are going 
to promote and not hinder competition between the airlines. This must 
be a primary goal because without competition the entire premise of the 
deregulated industry relying on market forces makes no sense. The 
Government cannot afford to focus narrowly on each individual loan 
guarantee application while ignoring the big picture issue of how the 
overall assistance package affects the balance of competition in the 
industry.
  Second, companies receiving assistance need to be monitored closely 
to make sure they are using the money responsibly. Are the taxpayer 
funds being used to subsidize dividends to the shareholders, lucrative 
compensation for top executives, or increased lobbying? The legislation 
does contain some provisions with respect to executive compensation, 
but the additional issues I am raising could send a message, at a time 
when America is hurting, that some of the powerful may be profiting.
  Third, companies receiving assistance and their major stakeholders 
should be required to demonstrate that they are doing everything in 
their power to improve the situation. Companies would have to show that 
they have a plan for returning to profitability and that the plan is 
actually being followed. Top managers should take salary reductions and 
debtholders and employees should make sacrifices as well. Taxpayers who 
are funding that $15 billion legislative package should know that all 
of the company's stakeholders are helping to shoulder the burden.
  Fourth, there needs to be an upside for the taxpayer. In the Chrysler 
bailout legislation, the Treasury Department received stock options 
that eventually led to a substantial profit for the taxpayers. 
Similarly, this effort should be coupled with a mechanism for the 
public to recoup its investment when airlines return to profitability.
  Fifth, service to small markets must not be a casualty of this 
crisis. As airlines cut flights or routes in response to the current 
predicament, their first instinct may be to eliminate small market 
service and turn small communities in Nebraska and Oregon and other 
rural States into sacrifice zones. Americans need an airline system 
that connects the entire country and not just the large hubs. Any 
program of Government assistance to the airlines must seek to encourage 
the airlines to maintain and indeed improve service in the small 
markets.
  Sixth, companies should be rewarded for treating employees in a 
responsible manner. Approximately 100,000 airline workers have already 
been laid off--but there are significant differences from airline to 
airline in the type of severance arrangements offered, and also in the 
efforts the airlines make to rehire workers when conditions begin to 
improve again. When it comes to public assistance, companies with more 
responsible labor policies should have a significant leg up in those 
loans and loan guarantees.
  Seventh, and finally, the current focus on the interests of the 
airlines should not come at the expense of efforts to protect the 
interests of consumers. The fact is, this is a concentrated industry in 
which consumers often face limited choices. There is a real risk that, 
if some air carriers fail, the competition situation may get worse 
before it gets better.
  That makes consumer protection all the more important in a number of 
basic areas--areas where the Department of Transportation Inspector 
General has already said there is a serious problem, and that Members 
of this body have tried to address in passenger rights legislation.
  There may be a need as this new effort goes forward for proconsumer 
rules in order to protect consumers.
  Adhering to these seven core principles that I have laid out this 
morning is not going to be easy. There is no simple rule or formula 
that Congress should impose, or that the board could follow that would 
automatically achieve all of the objectives that I have laid out today.
  It is critical, in my view, in order to make sure this job is done 
responsibly, for Congress to obtain on a weekly basis the information 
necessary to exercise responsible oversight over the airline industry. 
This information must be real-time data, including load factors, yields 
per mile, fares, type of aircraft, dividend payments, service to small 
markets, cancellations, workforce statistics and route information.
  In the coming weeks, the Air Transportation Stabilization Board 
begins to implement the loan guarantee program. I am certain the Senate 
Commerce Committee under the leadership of Chairman Hollings will be 
actively engaged. I am anxious to work with my colleagues to put in 
place the principles that I have outlined today, as well, I am sure, as 
other Members of the Senate who will propose what they believe should 
govern how this $15 billion is allocated.
  The airline industry has been heard from. Now the public has a right 
to ask the airline industry to support policies and to work with the 
U.S. Congress to ensure that this is true competition, affordable 
prices, and decent service.
  In closing, I am of the strong view that the work of the Congress on 
that $15 billion legislation began when the bill passed. I hope and 
trust that my colleagues will join with me in doing everything we can 
to ensure that at the end of the bailout process the American people 
are left with a more competitive airline industry, one that offers 
high-quality service to every area of the country and gives the public 
what they have a right to expect will be the end process of that 
unprecedented legislation that the Congress passed a little less than 2 
weeks ago.
  Madam President, I yield the floor.

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