US rail and air industries demand more aid

An Amtrak bailout and expected aid to airlines are seen as national security effort.

It's been a week of high-priced government rescue plans for America's trains and airplanes – in the name of national security.

• Long-suffering Amtrak struck a $100 million deal with the White House to keep its passenger trains running through October.

• United Airlines asked for – and may get – $1.8 billion in government loan guarantees, even though many in the industry say the cash-rich company may not even need the money.

• And other airlines, including US Airways, continued lobbying for a total of $1.1 billion in loan guarantees they've requested – on top of the $5 billion in cash they got in the wake of the 9/11 attacks.

It all hints at a growing level of government support for America's transportation backbone in the post-9/11 era. Many back the trend – arguing that planes and trains are vital and vulnerable links in a mobile society that's under threat of terrorism. Others question whether the moves risk weakening transportation companies by fostering a kind of welfare-state mentality.

"It sets a bad precedent," says David Williams of the conservative Citizens Against Government Waste. "Now any sort of transportation glitches will send companies asking for money ... in the name of national security."

This week, the White House and new Amtrak president David Gunn played a game of political chicken. Mr. Gunn said the passenger-rail system would have to shut down – stranding 65,000 daily riders, including 35,000 in the Northeast corridor – unless it got $200 million.

Transportation Secretary Norman Mineta, by contrast, wanted to drop subsidies of Amtrak's operating budget, get states to ante up more for Amtrak, and gradually open up the nation's passenger-rail service to competition.

Amtrak's security role

In the midst of the bargaining, Gunn got crucial help from Congress, where support for Amtrak is strong. The powerful Sen. Robert Byrd (D) of West Virginia, for instance, said, "Amtrak has a vital homeland security role."

Indeed, since Sept. 11, Amtrak has seen something of a renaissance – evidence to some of its increasingly important place in American life. In May, for instance, ridership in the Northeast corridor was up 5.8 percent over last year – and revenue on those routes grew 25 percent.

Bailout, strings attached

In the end, the deal reached Wednesday gives Amtrak an immediate $100 million federal loan. It would allow the rail company, which the government set up in 1971, to ask Congress for a $100 million loan to help finish out its fiscal year, which ends Sept. 30. In return, Secretary Mineta got the promise of a full-scale audit and possible wage freezes for Amtrak employees.

Ultimately, observers say, the Bush administration didn't want to risk stranding masses of passengers by letting Amtrak shut down – especially in the security-sensitive cities of Washington and New York. That could have opened it up to charges of being soft on security.

Yet the pressure to solve Amtrak's immediate problems means its long-term future went unaddressed. Amtrak has never made a profit. In fact, most of the world's passenger-train systems are running deficits – the exceptions being the Japanese bullet train and the French TGV route from Paris to Lyon.

Meanwhile, airlines continue to push for their piece of government aid. So far, only America West has received a loan guarantee – of $379 million. But United's request on Monday puts the total outstanding requests at $2.9 billion. Since 9/11, United has lost $2 billion – although it had $2.9 billion in cash as of March 31.

Skeptics of United's request say it doesn't need Uncle Sam's help. "What ... does the taxpayer need to subsidize [an airline] for if the company can go out and get it" in capital markets, asked Continental Airlines chief Gordon Bethune this week.

Some people suspect United is actually using the request to try to get wage concessions from its powerful pilots' union. The government might require a wage freeze as part of a deal.

But whether it's a tactic or a legitimate request, observers say, it's part of an undeniable new trend.

• Wire-service material was used in this report.

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