skyboi
June 5, 2002, 11:41 PM
Tuesday June 4, 4:30 pm Eastern Time
Reuters Company News
U.S. Senate votes to preserve air loan guarantees
By John Crawley
WASHINGTON, June 4 (Reuters) - The U.S. Senate voted on Tuesday to preserve $10 billion in loan guarantees for struggling airlines, giving cash-poor US Airways (NYSE:U - News) and other proponents of the program new leverage on Capitol Hill.
The 91-4 vote to remove language from a homeland security spending bill that would have significantly restricted the program brightened prospects for US Air.
The Arlington, Virginia-based carrier plans to seek $1 billion in guarantees and mounted a heavy lobbying campaign to preserve the program established by Congress as part of a larger bailout to help airlines hurt financially by the Sept. 11 attacks.
Looking for ways to pay for homeland security priorities and stay within White House spending guidelines, some in Congress sought to rescind or at least scale back the little-sought loan guarantee plan to save between $300 million and $1.3 billion.
As part of its $30 billion version of the homeland security bill approved less than two weeks ago, the House of Representatives cleared a plan to defer airline loan guarantee payouts until Oct. 1, the start of the new fiscal year.
And a proposal approved at the same time by the Senate Appropriations Committee would have left little money for guarantees in 2002 and reduced the total cost of the program from $10 billion to $4 billion in 2003.
US Airways said the restrictions would have a devastating impact on its efforts to restructure its finances. The No. 6 U.S. carrier lost $2.1 billion last year and another $269 million in the first quarter of 2002.
Under the federal guarantee program, airlines secure backing from the government for private financing.
MOUNTING POLITICAL PRESSURE
With political pressure mounting, the Senate decided to back off and help US Airways.
An amendment offered by Sen. Robert Byrd, a West Virginia Democrat and appropriations committee chairman, and the panel's ranking Republican, Ted Stevens of Alaska, removed the loan guarantee restrictions from the Senate homeland security bill.
Although the fate of loan guarantees must still be decided during House and Senate negotiations on their two versions of the legislation, the Senate shift signaled that powerful lawmakers had coalesced behind the airline industry.
"We need to send a strong signal to the other body when we go to conference that we cannot destroy the aviation loan program," said Sen. John McCain, an Arizona Republican.
US Airways, which is seeking more than $1 billion in cost savings before applying for guarantees, welcomed the Senate vote.
"Today's action sends a strong signal that any last-minute changes in the airline loan guarantee program established after September 11 are clearly unacceptable," Dave Siegel, the airline's president and chief executive said in a statement.
"US Airways is too important of an economic asset to hundreds of communities up and down the East Coast to allow this company to fail," Siegel said.
A government board set up to oversee the loan guarantee program has approved only one application so far. That was from America West Holdings (NYSE:AWA - News) for $380 million.
In the past week, the board has rejected applications from Vanguard Airlines Inc. (OTC BB:VNGD.OB - News) and Frontier Flying Service Inc., a small commuter carrier based in Alaska. The government was not confident either carrier could pay back the loans.
United Airlines (NYSE:UAL - News) is considering a loan guarantee application. The application deadline is June 28.
Reuters Company News
U.S. Senate votes to preserve air loan guarantees
By John Crawley
WASHINGTON, June 4 (Reuters) - The U.S. Senate voted on Tuesday to preserve $10 billion in loan guarantees for struggling airlines, giving cash-poor US Airways (NYSE:U - News) and other proponents of the program new leverage on Capitol Hill.
The 91-4 vote to remove language from a homeland security spending bill that would have significantly restricted the program brightened prospects for US Air.
The Arlington, Virginia-based carrier plans to seek $1 billion in guarantees and mounted a heavy lobbying campaign to preserve the program established by Congress as part of a larger bailout to help airlines hurt financially by the Sept. 11 attacks.
Looking for ways to pay for homeland security priorities and stay within White House spending guidelines, some in Congress sought to rescind or at least scale back the little-sought loan guarantee plan to save between $300 million and $1.3 billion.
As part of its $30 billion version of the homeland security bill approved less than two weeks ago, the House of Representatives cleared a plan to defer airline loan guarantee payouts until Oct. 1, the start of the new fiscal year.
And a proposal approved at the same time by the Senate Appropriations Committee would have left little money for guarantees in 2002 and reduced the total cost of the program from $10 billion to $4 billion in 2003.
US Airways said the restrictions would have a devastating impact on its efforts to restructure its finances. The No. 6 U.S. carrier lost $2.1 billion last year and another $269 million in the first quarter of 2002.
Under the federal guarantee program, airlines secure backing from the government for private financing.
MOUNTING POLITICAL PRESSURE
With political pressure mounting, the Senate decided to back off and help US Airways.
An amendment offered by Sen. Robert Byrd, a West Virginia Democrat and appropriations committee chairman, and the panel's ranking Republican, Ted Stevens of Alaska, removed the loan guarantee restrictions from the Senate homeland security bill.
Although the fate of loan guarantees must still be decided during House and Senate negotiations on their two versions of the legislation, the Senate shift signaled that powerful lawmakers had coalesced behind the airline industry.
"We need to send a strong signal to the other body when we go to conference that we cannot destroy the aviation loan program," said Sen. John McCain, an Arizona Republican.
US Airways, which is seeking more than $1 billion in cost savings before applying for guarantees, welcomed the Senate vote.
"Today's action sends a strong signal that any last-minute changes in the airline loan guarantee program established after September 11 are clearly unacceptable," Dave Siegel, the airline's president and chief executive said in a statement.
"US Airways is too important of an economic asset to hundreds of communities up and down the East Coast to allow this company to fail," Siegel said.
A government board set up to oversee the loan guarantee program has approved only one application so far. That was from America West Holdings (NYSE:AWA - News) for $380 million.
In the past week, the board has rejected applications from Vanguard Airlines Inc. (OTC BB:VNGD.OB - News) and Frontier Flying Service Inc., a small commuter carrier based in Alaska. The government was not confident either carrier could pay back the loans.
United Airlines (NYSE:UAL - News) is considering a loan guarantee application. The application deadline is June 28.