Airlines, facing pension problems, high fuel costs, turn to Congress

Just four years after Congress agreed to a massive bailout for the struggling aviation industry, lawmakers are poised once more to help airlines in the wake of bankruptcy filings, rising fuel costs and growing pension burdens.

Just four years after Congress agreed to a massive bailout for the struggling aviation industry, lawmakers are poised once more to help airlines in the wake of bankruptcy filings, rising fuel costs and growing pension burdens.

Lobbyists for the seven major U.S. carriers sought to coalesce their often-disparate demands behind their trade group, the Air Transport Association (ATA), after two airlines filed for Chapter 11 protection last week. Out of Delta and Northwest’s $29 billion in combined debts, the Pension Benefit Guaranty Corp. (PBGC) estimates that more than $11 billion soon could be foisted on the federal government through unpaid pension bills.

Now Congress and two key senators are trying to come to the airlines’ rescue. A spokeswoman for Sen. Ted Stevens (R-Alaska), chairman of the Commerce Committee, said that her boss was drafting a broad hurricane-relief package that includes a recommended suspension of the airlines’ 4.3 percent fuel tax, a longtime industry priority.

Sen. Johnny Isakson (R-Ga.), a key ally of Georgia-based Delta, said late last week that Delta and Northwest’s bankruptcies had given him the catalyst needed to bring a version of his airline-specific pension bill to a floor vote.

“We’re working on getting a bill on the floor [this] week for action in the Senate,” Isakson said. “All other issues are moot in terms of help for airlines. All other issues, with regard to passenger-facility charges or fuel taxes, we can do those later.”

A spokeswoman for Senate Majority Leader Bill Frist (R-Tenn.) said that airline relief was high on the chamber’s agenda but that a floor vote might prove impossible to squeeze in this week.

Congress last increased passenger-facility charges, now levied at $4.50 per plane ticket sold, in 2001. Another relief item on airlines’ wish list, the separate listing of fuel surcharges on tickets, could be handled through regulatory changes as oil prices climb closer to a punishing $70 per barrel.

Isakson’s pension solution would extend to 20 years the so-called “amortization period” for airlines to pay off existing obligations, while the White House has requested only seven years. Avoiding a taxpayer bailout by the PBGC is Delta and Northwest’s chief concern, but other carriers are hardly eager to see Congress reward two competitors without receiving a legislative gift of their own.

“While ATA is well aware of the importance of pension legislation to our individual carriers, because we have members with differing views we have not taken a position,” said ATA President James May.

Delta and Northwest have been pushing for speedy passage of Isakson’s bill since their bankruptcy became a realistic consideration. Though there is no direct House counterpart bill, Delta spokeswoman Benet Wilson singled out House GOP conference Chairwoman Deborah Pryce (Ohio) as an airlines ally.

“For us, the sooner the better. We understand how Congress works, but with two major legacy carriers in Chapter 11 it’s obviously come to the front burner now,” Wilson said.

Northwest’s government-relations office did not return calls for comment. But Rodney Slater, a Patton Boggs lobbyist and former transportation secretary under President Clinton who also advises Northwest’s board of directors, underscored the politically sensitive congressional climate that airlines face.

“It’s a difficult procedure to manage when you’ve got Congress dealing with the Supreme Court, and now challenges in the aftermath of Hurricane Katrina,” Slater said.

Another lobbyist, who asked to remain anonymous because of the industry’s internal pension tension, described the lobbying field as dizzyingly complicated.

“Depending on which carrier you talk to, you will get a different story. There are few uniform positions,” the lobbyist said.

Opposing Delta and Northwest more overtly are smaller airlines such as AirTran and Spirit, while the remaining legacy carriers are split.

“Southwest and Continental and American and America West-US Air, some of them are opposed to any changes. … This is the airline industry, and nothing is ever easy,” the lobbyist added.

American and Continental want to remain in control of their defined-benefit pension plans, which the PBGC insures. Most other airlines are at varying points in the process of converting to defined-compensation plans akin to 401(k)s, while newer carriers have never embraced defined-benefit pensions.

“American is going to be paying more money into their pension plan. They’re capable of having a defined-benefit plan because their labor groups gave them $2 billion in concessions after 9-11,” said one lobbyist familiar with the airline’s financial situation, who nonetheless stressed that congressional action is crucial to American’s defined-benefit stability.

The House Transportation Committee’s aviation panel, headed by Rep. John Mica (R-Fla.), lacks jurisdiction over the airlines’ most pressing issues, pensions and fuel taxes. But Mica warned that the loss of the 4.3-percent fuel tax could hurt the major carriers, more than help.

“It looks like it could get worse before it gets better,” said Rep. John Mica (R-Fla.), chairman of the House Transportation Committee’s aviation panel. “Even with some of these reforms, some of the legacies still won’t survive, even with pension reforms now on the table.”