Air Transport World

A board without pity: though its mandate was lightly defined, the tight-fisted ATSB forced change on the industry.(Air Transportation Stabilization Board, airline industry)

In the end, the Air Transportation Stabilization Board's legacy came down to whether it would guarantee $1.8 billion in loans to United Airlines. In early December, two of three ATSB members rejected UAL's application but left open the possibility of guarantees if a bankruptcy filing produced a more credible business plan. Last summer, US Airways received a conditional $900 million loan guarantee a month before it declared bankruptcy.

The board's UAL rejection language was harsh: "The business plan submitted by the company is not financially sound ... [It] does not support the conclusion that there is a reasonable assurance of repayment and would pose an unacceptably high risk to US taxpayers."

The $10 billion loan guarantee program was authorized by the same statute, the Air Transportation Safety and System Stabilization Act, that gave US airlines $5 billion in capacity-based cash grants (ATW 12/01 p. 24). The statute said the loans must assure first, the safety, viability and efficiency of the US airline system and second, access to capital. But it was silent about protecting competition.

A government official suggests both the Act and implementing regulations "allowed for interpretation and discretion by the board staff." Many observers initially feared that, intentionally or not, the board would overinterpret and use too much discretion to design the industry's structure. Aside from allocating guarantees, the board must administer them until the last repayment is made.

ATSB members include Federal Reserve Chairman Alan Greenspan, Treasury Secretary Paul O'Neill until he was ousted in December and Transportation Secretary Norman Mineta, who vote through delegated representatives. …

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