Commercial Aviation: Legacy Airlines Must Further Reduce Costs to Restore Profitability

GAO-04-836 Published: Aug 11, 2004. Publicly Released: Aug 11, 2004.
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Since 2001, the U.S. airline industry has confronted financial losses of previously unseen proportions. From 2001 to 2003, the industry lost $23 billion, and two of the nation's biggest airlines have gone into bankruptcy. To assist airlines, the Congress provided U.S. airlines with $7 billion of direct financial assistance--most recently in the form of $2.4 billion of financial assistance under the 2003 Emergency Wartime Supplemental Appropriations Act. Under the Act and its accompanying conference report, the conferees directed GAO to review measures taken by airlines to reduce costs, improve revenues and profits, and strengthen their balance sheets. The Congress also tasked airlines receiving assistance to report their cost-cutting plans to GAO. GAO was also required to report on the financial condition of the U.S. airline industry by Vision 100--Century of Aviation Reauthorization Act, which became law in January 2004. In consultation with the Congress, GAO agreed to satisfy these directives and report to the Congress on (1) the major challenges to the airline industry since 1998, (2) measures airlines report taking to remain financially viable, (3) the current financial and operating condition of the industry, and (4) how the competitiveness of the domestic airline industry has changed since 1998.

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