Washington, D.C. – U.S. Senator Mike Enzi, R-Wyo., does not want the federal government to pick winners and losers in the airline industry through the airline relief package.

Enzi and several of his colleagues sent a letter to Mitch Daniels, Director of the Office of Management and Budget, regarding the fair allocation of loan guarantees under the recently passed Air Transportation Safety and System Stabilization Act, which is now public law.

Enzi wrote that allocation of the loan guarantees should not result in the consolidation of the airline industry, less competition and higher fairs or in some airlines being denied the relief that Congress intended, including regional carriers such as Great Lakes Aviation based in Cheyenne, Wyoming.

The letter is included below.

October 2, 2001

The Honorable Mitch E. Daniels, Jr.
Director
Office of Management and Budget
Eisenhower Executive Office Building
17th Street & Pennsylvania Ave., N.W.
Washington, D.C. 20503

Dear Mr. Daniels:

It is our understanding that the Office of Management and Budget ("OMB") is currently considering the parameters of how the Loan Guarantee Program authorized under the Air Transportation Safety and System Stabilization Act, Public Law 107-42, will be administered. We write to clarify congressional intent.

The overarching purpose behind the Act was to address the financial condition of the airline industry. The tragic events that occurred on September 11, 2001, had far reaching effects on the airline industry. Commercial air carriers were used as weapons of mass destruction with devastating results. The resulting federal government ordered shutdown of the air transport system resulted in a total loss of revenue for the airline industry for several days. This loss of revenue, the resulting slowdown in air travel, and issues regarding potential liability all acted to place the airline industry in an extremely precarious financial situation. As a result, Congress acted quickly to stabilize the airline industry by setting forth assistance on three fronts. It offered a cash infusion to reimburse the airlines for losses ensuring from the government shutdown of the airways. It offered loan guarantees to allow those companies that lost the ability to obtain financing due to a more conservative lending market after the terrorist attacks to obtain government guaranteed loans. It offered a limitation on liability to address the problem faced by several airlines that were unable to obtain financing due to their perceived potential liability.

Congress acted on these three prongs to ensure that all airlines were given an equal opportunity to return to their financial position prior to September 11, 2001. That is, Congress believed that it needed to act in an equitable manner to prevent the human catastrophe from becoming an economic one. It was never our purpose, and still is not, to provide a taxpayer funded "bailout" for airlines that were doomed to fail even before the events of September 11. However, it was also not our intention for the federal government to become the architect of a new aviation economy, effectively picking winners and losers and in doing so contributing to the further consolidation of the airline industry.

Competition in the aviation industry has always been precarious. Since deregulation, national and regional competitive low cost carriers have sprung up and been the driving force of the benefits of airline deregulation. While some have failed, the entry of this low fare competition has been shown to reduce fares and enhance service for the flying public. Any attempt by the federal government to predetermine which airlines should survive and which airlines should not would upset this precarious balance and could result in detrimental results for the American people.

With respect to the Loan Guarantee Program, Congress meant for it to be used to the fullest extent. Any attempt to make the program proscriptive and preclude certain airlines from its benefits would only put the government in the position of deciding which airlines are worthy of existing and which are not. The original proposal for the use of available seat miles as a guide for allocation of resources points to our intent that all airlines would be eligible to receive this aid and obtain the ability to put themselves in a similar position to the one they were in on September 10. We believe this is the single most important guiding principle you should use. This would mean making credit available on terms and conditions comparable to those available to any such carrier prior to September 11. This may involve risk to the federal government.

It is important to note that the airlines that make up the airline industry cannot be viewed through the same prism. They are a kaleidoscope of carriers that may be in different financial positions, have different asset bases and different revenue streams. Each carrier is important to the health of this industry as it struggles to return to normal operations. Of course each segment of the industry would like to see its competitors wither and die. We believe that if airlines are to fail, that determination should be made by the marketplace, not the federal government. If the government precludes airlines from receiving aid through the loan guarantee program, it also places itself in the position of the deciding of the fate of thousands of workers in the airline industry.

It is difficult to look down the road at the airline industry and be able to make a cogent determination of who would survive and who wouldn't given the uncertainty of air travel, including such factors as the public's willingness to fly and the restrictions placed on Ronald Reagan Washington National Airport. If Congress had wanted the government to predetermine the fate of a specific airline, it could have accomplished this by passing only one or two prongs of the relief package. This would have effectively barred airlines from aspects of financial aid necessary to return them to their position on September 11, 2001. Congress did not intend that any existing airline should be barred from relief. The OMB should not take action that is at odds with this intent.

Sincerely,

Michael B. Enzi, et al.