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Congressional leaders are calling on colleagues to enact relief for the ailing airline industry in the wake of bankruptcy filings Wednesday by Delta Air Lines Inc. and Northwest Airlines Corp., and accelerating fuel price hikes. In the past three days appeals have come from Sen. Ted Stevens, R-Alaska, chairman of the critical Commerce Committee, as well as other senior Republicans on his panel, Arizona’s John McCain and Montana’s Conrad Burns. They are considering easing the heavy tax burden levied on both jet fuel and passenger tickets to help struggling major carriers weather the latest crisis. Separately, authors of a pension reform bill, which also would help the airlines cut costs, are urging House leaders to break their legislation free from a larger Social Security bill now stalled on Capitol Hill. “I don’t think we should ignore any option,” McCain said during a hearing on Hurricane Katrina’s impact on the aviation industry Wednesday. McCain was responding specifically to calls by the airlines for a one-year moratorium on a 4.3 cent-per-gallon tax airlines pay to shore up a federal trust fund used to maintain airports and other aviation-related infrastructure. “If fuel prices maintain these levels, more [bankruptcies] will certainly follow,” said Burns, chairman of the Commerce panel’s aviation subcommittee. Since 2001, four major U.S. carriers have declared bankruptcy. The others are UAL Corp. and US Airways Group Inc. James May, president of the Air Transport Association, the lobbying group for the major airlines, urged Congress to not only waive the fuel tax but also approve a one-time $600 million appropriation to cover the lost revenue. A suspension of the tax “is only a small step in right direction,” May said. Over the long-term, he said Congress should examine the entire tax burden on the industry, which costs the industry $15 billion a year and accounts for 26 percent of the cost of the average ticket. Stevens agreed to examine the range of levies on the business, which include at least 12 different charges to help pay for transportation security and infrastructure. “We ought to take a long look at revamping government’s relationship to the airline system and deal with those taxes,” he said. House Speaker Dennis Hastert has not committed to any particular solution, preferring to wait until he can consider various plans the House committees and the Senate put forward. He also said Congress should not act until it is clear the airlines will emerge from bankruptcy with consolidated debt and improved competitiveness. Although one-time tax relief may be more politically palatable, Saint Louis University finance professor and bankruptcy expert Michael Alderson said airlines can only fix their problems by getting a handle on pension and labor costs. “Taxes are not their biggest problem. Legacy costs, those costs that roll over year after year like pension and healthcare are their biggest problem. Tax relief just takes off some of the pressure.” On the pension relief side of the equation, the union representing pilots argues that the most pressing issue right now for Delta and Northwest is comprehensive legislation that would include a measure by Sens. Jay Rockefeller, D-W.Va., and Johnny Isakson, R-Ga., allowing the airlines to freeze their pension liabilities and spread full funding of those obligations over 25 years. However, Senate Finance Committee chairman Charles Grassley, R-Iowa, said in July that a 25-year extension was “ridiculous.” A bill recently passed out of his committee allows the airlines to stretch out their payments over 15 years. Some experts wonder if Northwest’s bankruptcy was a calculated plan by the airline to force Congress’ hand in expediting the pension reform bill. “This filing is a statement,” an airline consultant not working with Northwest said. “It is a warning to Congress that if pension reform doesn’t happen soon, Northwest is ready to make it the PBGC’s [Pension Benefit Guarantee Corp., the agency that insures private pensions] problem.” One thing is clear from top lawmakers’ reluctance to commit to airline pension relief: Congress is in no mind to repeat the kind of $15 billion cash and loan guarantee infusion that helped the industry following Sept. 11, 2001. Meanwhile, the PBGC warned Delta and Northwest on Thursday not to skip pension funding while in bankruptcy. PBGC would have to pick up $12 billion in obligations if both airlines ceased paying into the fund. House Education and the Workforce Committee Chairman John Boehner, R-Ohio, said the Delta and Northwest bankruptcies should convince congressional tax writing committees to pass his pension reform bill and drop their insistence in tying its fate to Social Security. Unlike the Senate bill, his version provides for no extension of the airlines pension contributions. “I am hopeful that both companies will work in the best interest of their workers and retirees and avoid turning their pension plans over to the already cash-strapped PBGC,” Boehner said. Shanon D. Murray and Lou Whiteman contributed to this report. Copyright �2005 TDD, LLC. All rights reserved.

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