Commercial Aviation: A Framework for Considering Federal Financial Assistance

The terrorist attacks on the World Trade Center and the Pentagon on Sept. 11 killed thousands of Americans and foreign nationals. The economic toll will also be enormous. Countless jobs and retirement funds are now at risk. Estimates of the losses to the airline industry alone have ranged from $4 billion, according to many analysts, to more than $20 billion, according to some airline officials. Congress has already appropriated $40 billion for emergency responses, including increased transportation security, and Congress is considering financial assistance to the airline industry. GAO believes that the government needs to clearly define the nature of the problem--separating short-term needs from long-term challenges, industry wants from real needs. Although all airlines now face major financial challenges, government assistance cannot overcome the financial difficulty that confronted several carriers before the events of September 11. The government has a range of options to assist the airline industry, from loans and loan guarantees to tax subsidies. The choice and design of the assistance is critical to targeting federal aid to the immediate problems, spreading responsibility among all industry stakeholders, and ensuring accountability to Congress and the American people. Because an unknown level of risk will accompany such assistance, mechanisms must be put in place to protect the federal government and the taxpayers from excessive and unnecessary losses.