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The checks for the airline industry are en route. Let's just say not all bailouts are created equal.
By STEVE HUETTEL
© St. Petersburg Times, published October 5, 2001
Richard Maberly felt a twinge of excitement when he heard that his small cargo airline got its piece of the government's $15-billion airline industry bailout last Friday.
The thrill was gone once he learned the amount of the check Uncle Sam wrote to Florida West International Airways: $819.
The Miami cargo carrier received the smallest of 55 grants the Department of Transportation has awarded so far to compensate airlines for actual and projected losses from the Sept. 11 terrorist attacks.
That won't make a dent in the airline's $113,800 weekly payroll for about 90 employees or even the $20,000 bill to fuel one of Florida West's four leased jets. His chief financial officer joked that the check might cover the office lunch tab.
"I'm not upset in the least," said Haberly, president and chief executive, who bought the airline in bankruptcy court with a partner in 1996. "If I'd got nothing I wouldn't have objected. There are people who have been hurt a lot worse."
United Airlines, which will lay off 20,000 workers and cut its schedule 31 percent, is getting nearly $391-million, the biggest single chunk of cash. American Airlines and Trans World Airlines, both owned by AMR Corp., are receiving a combined $437.4-million.
The money handed out so far is about half of the $5-billion in cash grants Congress earmarked for airlines, with the rest coming as soon as next week, the DOT says.
Still to be decided is how to divvy up $10-billion in loan guarantees designed to prop up airlines hurt when the government grounded planes after Sept. 11 and still suffering from weak passenger demand.
The Office of Management and Budget is expected to release rules for loan assistance today. A high-powered committee led by Fed chairman Alan Greenspan, Transportation Secretary Norman Mineta and Treasury Secretary Paul O'Neill will decide who gets the loan guarantees.
With airlines potentially facing bankruptcy, the stakes are high. Many are bickering over the ground rules.
One question is whether the government should cover 100 percent of the loans.
Some large carriers argue that the government should guarantee only 80 percent and loan recipients should have to put up collateral to cover the rest. That would prevent financially shaky airlines from failing even with the money and leaving taxpayers holding the bag, they say.
But that proposal puts smaller airlines at a potentially fatal disadvantage, said Ed Faberman, executive director of the Air Carrier Association of America, which represents start-ups including AirTran Airways and Spirit Air Lines, both headquartered in Florida.
The bailout bill was designed to maintain the level of airline service and competitive environment that existed before Sept. 11, he said.
"You cannot do that if you tilt this process in favor of a few big and politically savvy companies," Faberman said.
"The public will not be happy if three large carriers come out of this and everyone else is out of business."
Another dicey issue is what kind of requirements the committee, called the Air Transportation Stabilization Board, might place on airlines that get loans.
David Walker, the comptroller general of the United States and a board member, told the New York Times he was worried airline failures could tighten some airlines' dominance of big city and other hub airports.
Alfred Kahn, known as the father of airline deregulation, said he wasn't sure what to make of a suggestion by Sen. Charles Schumer, D-N.Y., that carriers receiving aid be forced to sell $99 tickets.
"I don't necessarily oppose a fare sale, but that's getting awfully close to reregulation," said Kahn, former Civil Aviation Board chairman and now professor emeritus of political economy at Cornell University.
"I don't think an emergency is the time to restructure an industry."
Some smaller carriers weren't happy with how the grant money was divided up either.
Under the bill signed by President Bush, passenger airlines will split $4.5-billion based on "available seat miles," an industry standard that counts the number of seats on each airline's flight multiplied by the flight length.
Start-up carriers and some commuter airlines which make short flights said that put them at a disadvantage.
Cargo airlines will split $500-million in grants based on how many tons of freight they carry times the number of flight miles.
Haberly, who lives in Marietta, Ga., said he had no idea how much Florida West would receive when it applied for the grant. He estimates the airline lost more than $100,000.
Its four planes were grounded until late Sept. 14, losing two or three daily flights hauling computer and electronics equipment to South America and returning with perishables.
This is Florida West's most profitable time, when Latin America's growing season is in full swing, he said.
For the last month, for example, the airline has carried 90,000 pounds of fresh asparagus from Peru each day. Other big cargos: farm-grown salmon from Chile, cut flowers from Colombia and fresh berries.
The trick, he says, is finding cargo somewhere in South America that's ready for shipment to America after the plane brings a load of manufactured goods to a place like Buenos Aires, Argentina, which has few export goods.
His company has revenues of about $50-million annually and alternates between making small profits and taking small losses, Haberly said.
"I'm in good shape; we're gonna be fine," he said.
-- Researcher John Martin contributed to this report. Steve Huettel can be reached at
huettel@sptimes.com or (813) 226-3384.