US Airlines Hope Commission's Proposals Fly in Washington
SEATTLE — ALTHOUGH airlines welcomed the recommendations of a federal commission chartered to help them, critics say the proposals amount to tinkering that will not restore the industry to health.
The National Commission to Ensure a Strong Competitive Airline Industry proposed this week that the nation's airlines should be exempt from any new energy tax coming out of current federal budget negotiations.
"The airlines just don't have the money for that," says Tim Neale, a spokesman for the Air Transport Association, which represents airlines. "We are hopeful that since Congress and the president did appoint this commission, they will take this ... seriously." United States carriers have lost $10 billion over the last four years and $4 billion in 1992 alone.
The commission also recommended easing existing taxes on ticket purchases, which currently cost the industry about $4 billion a year. And it recommended allowing foreign airlines to increase their ownership stakes in American carriers, provided that the home-country markets are open to competition from US airlines. The commission also proposed closer regulatory scrutiny of financially weak carriers. It will issue its final recommendations in a month.
Some analysts, however, are concerned that even these steps would not be enough. Although some big airlines are returning to profitability after the recession, problems remain:
* Many airlines are struggling to cut costs amid price wars. Some are pulling out of unprofitable routes, while others face labor-management disputes that can disrupt service. Seattle-based Alaska Airlines, for example, is in a standoff with flight attendants who have been working without a contract for two and a half years.
* Airlines lack cash to invest in new planes, causing large layoffs at jetmakers such as Boeing and McDonnell Douglas.
Paul Dempsey, director of the University of Denver's transportation law program, says the commission's proposals will not put these problems to rest and that tax-relief measures for the industry would be an indirect burden on all taxpayers. "If you're going to ask the American taxpayer to make a contribution," Mr. Dempsey says, "then you must provide a comprehensive solution."
He notes that the industry is unusual in being labor-, capital-, and energy-intensive, with high safety costs added on top. With deregulation starting 15 years ago, the federal government "abdicated oversight of an industry which is in the nature of a public utility," he suggests. He likens the current situation to a football game without referees or rules.
Dempsey's prescription is not for direct price controls but for a system of increased regulation in which the types of fares offered would be greatly simplified. He also recommends antitrust immunity for strong airlines to buy weaker ones, while ensuring opportunities for new carriers to enter the market.