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Three of the nation’s 10 largest commercial airlines could fail by week’s end if Congress fails to provide the industry with immediate financial support, aviation executives told Congress Wednesday. Testifying before the House Transportation and Infrastructure Committee, industry leaders said that last week’s terror attacks have damaged the nation’s airlines beyond their ability to repair. As ways to ensure the solvency of domestic carriers, they asked Congress to approve a $17.5 billion aid package and to limit airline liability for acts of terrorism using their planes. Douglas Parker, chairman and chief executive officer of America West Inc., identified his airline as one of the three that could go under in the coming days without some sort of relief. “Prior to Sept. 11, our cash situation was fine,” Parker said during his testimony. “But now we are draining $5 million in cash a day, and the ability for us to get new financing is nonexistent.” Beyond immediate aid and liability relief, airline executives urged lawmakers to federalize airport security and to take other steps to persuade consumers it is safe to fly. Delta Air Lines Inc. chairman and CEO Leo F. Mullin said his company’s fleet flew at about 29 percent of its capacity Tuesday, a figure other industry leaders echoed. Mullin and other executives at the hearing refused to name the other two carriers purportedly at risk of bankruptcy this week, but analysts speculated that US Airways Group Inc. and Continental Airlines Inc. are the most likely candidates. Neither airline had representatives at the hearing or returned calls seeking comment. But analysts said that US Airways Chairman Stephen Wolf told shareholders during the company’s annual meeting Wednesday that the airline had less than $1.2 billion in cash and needed to stem costs quickly if it is to survive. According to media reports, Continental CEO Gordon Bethune Wednesday told reporters in Houston that the airline expects revenues for the final three weeks of September to be down 60 percent from last year. But he insisted that Continental does not face an immediate threat of bankruptcy, the reports said. The airlines used the hearing to formally outline their request for aid. They ask that the government provide commercial and cargo carriers with about $4.7 billion in immediate cash to make up for revenue shortfalls in September. An additional $12.5 billion in loan guarantees is requested to help carriers operate between October and the end of the second-quarter 2002. The airlines would split the aid based on their market share before Sept. 11. Mullins said that even with the assistance, the industry could be forced to cut up to 100,000 jobs. The carriers also asked that Congress pass legislation that limits the liability of UAL Corp., parent of United Air Lines Inc., and AMR Corp., parent of American Airlines, for damages from last week’s crashes, when the jets slammed into the World Trade Center and the Pentagon. Thomas Horton, chief financial officer of AMR, said his airline will not be able to return to private capital markets without liability protection. “Until that cloud is lifted, there are no capital markets,” he said. In a filing with the Securities and Exchange Commission Wednesday, AMR said that barring liability protection, damage awards stemming from the attacks “may exceed American’s financial resources.” Executives also said United and American are not the only airlines legally exposed. Without congressional action, they said, future insurance premiums might be unaffordably high for some carriers. “As long as we and our insurers are responsible for acts of terror committed using our airplanes, we will have difficulty operating,” said Richard Anderson, chief executive of Northwest Airlines Corp. Frederick Smith, chairman and CEO of FedEx Corp., said that cargo carriers are subject to the same insurance rates as commercial carriers and also could face bankruptcy. “Cargo carriers could be put out of business without insurance relief,” he said. Backing the airlines was Morgan Stanley, which sent a letter Wednesday to Treasury Secretary Paul J. O’Neill outlining the industry’s dire funding prospects. In the letter, Gerry Pasciucco, managing director of fixed-income securities, and Nelson Walsh, managing director of investment banking, said the airlines in their current state have no chance of receiving private funding. “There will be no functioning capital markets for the U.S. airline industry until the uncertainty with respect to both liquidity and liability are eliminated,” the Morgan Stanley executives wrote. “Even then, access is likely to be severely limited until the path to a more normalized airline system becomes clearer.” On the morning of the attacks, Morgan Stanley was preparing to price a $2 billion secured debt offering for American Airlines. Copyright (c)2001 TDD, LLC. All rights reserved.

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