Roanoke Times
Copyright (c) 1995, Landmark Communications, Inc.
DATE: FRIDAY, August 20, 1993 TAG: 9308200062
SECTION: BUSINESS PAGE: A-7 EDITION: METRO
SOURCE: Knight-Ridder/Tribune
DATELINE: WASHINGTON LENGTH: Medium
The National Airline Commission report, sent to the White House and Congress on Thursday, makes 60 recommendations about how to help the airline industry recover its financial health, including exemption from the new federal fuel tax, more Export-Import Bank lending to U.S. manufacturers, larger ownership in U.S. airlines by foreign investors and multilateral aviation pacts.
President Clinton is expected to meet early next month with the panel, which he appointed in May.
At a news conference, commission president and former Virginia Gov. Gerald Baliles said the airline industry is in "deep trouble," and even with the broad changes recommended, it will take years for the industry to get out of its deep financial hole.
The airline industry lost $10 billion in the past three years, in part because of the Persian Gulf War, the U.S. recession, regulatory and tax burdens, and management "mistakes," which left airlines staggering under more than $35 billion in debt.
The industry now shows signs of only a "partial, fitful and inadequate recovery," the report said.
To help that recovery, the commission recommended tax changes including:
Permanently exempting airlines from the new fuels tax increase of 4.3 cents per gallon. The tax and spending package, signed into law this month, includes only a two-year exemption.
Releasing crude oil from the Strategic Petroleum Reserve when jet fuel prices rise substantially due to war or other national emergencies to help the industry avoid related price spikes, such as those seen during the Persian Gulf War.
Amending the alternative minimum tax so airlines and other capital-intensive industries do not have to pay taxes when they report losses. From 1990 to 1992, airlines paid $670 million in the tax, even though the industry recorded $10 billion in losses.
Returning the ticket tax to its previous level of 8 percent and the cargo waybill tax to 5 percent, from levels of 10 percent and 6.25 percent, respectively.
The commission also called for a shift from bilateral agreements with other nations to a system based on multinational arrangements, free of restrictions.
Toward this goal, the panel recommended approval of foreign investment of up to 49 percent voting equity in U.S. airlines. The ownership would be under bilateral agreements requiring that the foreign investor not be government owned, that there are reciprocal investment rights for U.S. airlines and that the investment will advance the national interest.
The commission also called for much stronger enforcement of current bilateral aviation rights.
Regarding U.S. aerospace manufacturers, the commission recommended increasing U.S. Export-Import Bank funding levels and lending authority to make financing for U.S. manufacturers equal to their foreign competitors.
The commission also recommended avoiding unilateral sanctions on manufacturers' export of aerospace products, unless the sanctions are necessary to protect national security.
The report criticized the Transportation Department for not monitoring the financial health of the industry more closely. The panel recommended a financial advisory committee be appointed by the president to review the financial condition of individual airlines and to advise the transportation secretary when an airline's financial condition "poses risks to the public or to the industry."
That committee would continue the review of major changes in an airline's ownership and control, and the secretary would raise any concerns directly with the airline's management or board.
by CNB