Airlines seeking help as war looms - Carriers want tax break, leniency in antitrust provisions

www.chron.com Jan. 30, 2003, 11:22PM By BILL HENSEL JR.

With Continental Airlines' Gordon Bethune on the front line, airline executives are lobbying for government help in the event of war with Iraq.

As the threat of war looms, the industry is seeking tax relief, the relaxing of some antitrust laws and relief on fuel taxes. They also want the federal government to reduce oil prices by releasing crude from the Strategic Petroleum Reserve.

Bethune, chairman and chief executive officer of Houston-based Continental, told a gathering in New York on Thursday that the nation needs a national transportation plan in place if war erupts.

Collectively, U.S. airlines have lost well more than $10 billion in the past two years and have reduced service and laid off employees. They are not expected to become profitable before 2004, and a war could magnify their troubles.

The major airlines find themselves in such a predicament because of changing business travel trends that have cut airlines' revenues, combined with the fallout from the terrorist attacks in 2001.

One feature the major airlines would like to see would be a waiver of a portion of the antitrust law, which forbids them to discuss flight schedules with each other, in the event of war. That could enable them to coordinate routes and flight frequencies and reduce service where demand is low.

Such discussions are prohibited now because it could restrict competition.

J.P. Morgan Securities airlines analyst Jamie Baker said some of the ideas being discussed by airline executives have merit, while others are questionable.

"War should not be an excuse for anti-competitive, anti-consumer behavior, though it is an appropriate backdrop to highlight the overtaxation of the airline industry," Baker said.

"In the event of a prolonged military conflict, some level of government assistance should be expected, although we would assume it would stop well short of re-regulation or the accommodation of collusion."

The airlines also want the government to temporarily suspend a $2.50 security tax implemented by the federal government after the Sept. 11 terrorist attacks to pay for increased security measures.

Bethune has long called for the elimination of that tax, saying it unfairly burdens the airlines and airline passengers.

"We are asking passengers to underwrite the national security," the Continental CEO said in an interview recently. "It is just unprecedented."

Others have called for releases from the petroleum reserves because supplies have been tight since the sharp drop in exports from Venezuela since political strife erupted there.

But President Bush appears unwilling to do that.

Companies that service the major airlines already are preparing for war. Texas Pneumatic Systems of Arlington recently developed a contingency plan, company President Bernie Rookey said.

The businessman worked for a similar company during the Gulf War in 1991 and said the airlines saw about a 20 percent decrease in business.

"It was pretty poor that year," he said. "I think generally you are going to see the American public is going to be reluctant to fly on airlines. Basic travel is going to cease or be reduced for a period of time."