Obama administration seeks plan to restore the ailing airline industry to financial health

LaHood to create panel to fix airline industry

WASHINGTON — Transportation Secretary Ray LaHood said Thursday he will create a special panel to come up with a plan to restore health to the ailing airline industry, which is losing billions of dollars, shedding jobs and blamed for using a business model that critics say undermines safety.

LaHood, who made his announcement at the end of a daylong forum on the state of the industry, promised that within a year the panel will produce “a roadmap for the future of the aviation industry.”

LaHood organized the closed-door forum at the behest of airline unions who say the industry has become dysfunctional, with the companies, their investors, their employees and their passengers all suffering.

Airlines were quick to tell the Obama administration what it can do to help — they want the government to pick up the entire tab for a new air traffic control system based on GPS technology instead of World War II-era radar technology.

The Federal Aviation Administration, which has been working on the new system for more than a decade, had already anticipated spending $15 billion to $22 billion on the “NextGen” program. But FAA’s plans also call for airlines to shell out an additional $14 billion to $20 billion to install equipment in their planes needed to use the new system.

Since a new air traffic system is a national priority that will benefit the entire nation, “it should be paid for by the federal government,” the Air Transport Association said in a statement Thursday.

Also, in a letter to LaHood, US Airways CEO Doug Parker said the industry wants the new system, but not if they have to pay for it. He said airlines simply don’t have the money.

LaHood told reporters he has met twice with Lawrence Summers, the top White House economic adviser, about helping airlines equip planes for NextGen.

Implementing NextGen — which is expected to reduce airport congestion, fuel use and greenhouse gas emissions — is a priority for the White House, LaHood said. But he offered no clue whether aid might be forthcoming.

Airlines have suffered repeated shocks in recent years, including the 9/11 terror attacks, the SARS virus, volatile oil prices and the current economic downturn. They offered fewer seats to passengers, measured by available seats and distance traveled, in the first quarter of this year than any other first quarter in more than a decade. They have shed more than 158,000 full-time jobs since employment peaked in 2001 and lost an estimated $30 billion to $60 billion in recent years. Thirteen airlines have filed for bankruptcy in the past two years.

The deregulation of airlines in 1978 has helped lower air fares consumers, but other trends have raised concerns about whether airlines are offsetting low fares at the expense of safety. Most large airlines are outsourcing the majority of their major aircraft maintenance and repairs, including to overseas repair shops. They are also farming out domestic, short-haul trips to regional airlines that hire less experienced pilots at lower wages.

Ed Wytkind, president of the AFL-CIO’s transportation trades department, said he doesn’t expect the Obama administration to attempt a return to the kind of regulation that existed before 1978 where the government set fares and routes. But he said he’d like the government to tighten requirements for new, low-cost airlines seeking to enter the marketplace.

A parade of low-cost carriers have at times driven air fares below cost, Wytkind said. That causes economic chaos for mainline carriers until finally the new entrants go bankrupt in a process that hurts the entire industry, he said.

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