NCPA - National Center for Policy Analysis

Airline Bailout Could Mean More Taxes, Regulations

September 20, 2001

A federal bailout package for U.S. airlines seems assured -- but new taxes and regulations on the industry may also not be far behind. Some 100,000 layoffs are expected by the end of the year, and Merrill Lynch predicts the industry will lose $6.5 billion. However, the form of the relief still isn't set.

  • The airlines have asked for $5 billion in cash -- but congressional sources say that's likely to be cut in half.
  • Congress also may not provide the $7.8 billion in tax relief some carriers want -- but some legislators are considering a $2-$3 per-ticket surcharge to fund a federal takeover of airport security.
  • Airlines spent $1 billion on security in 2000, while a $3 dollar ticket surcharge would generate $3 billion in funds for security.
  • Some lawmakers also believe new regulations regarding airline scheduling should go hand in hand with the assumption of federal responsibility for airport security.

However, other observers believe a re-regulating of the industry would be counterproductive, arguing the late-'70s deregulation of the industry sparked its growth.

  • In 1976, the industry took in $721 million in operating profits.
  • In 2000, that figure was $7 billion, unadjusted for inflation.

Source: Joseph Guinto, "Congress Eyes Airline Regulation And New Taxes To Pay For Bailout," Investor's Business Daily, September 20, 2001.


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