US Airways will take taxpayers for a ride

By CHRISTOPHER ELLIOTT
BALTIMORE SUN
So long, US Airways.
Now that the nation's seventh-largest air carrier has filed for bankruptcy protection a second time in as many years, many industry watchers give it only a few months before it liquidates.
Even David G. Bronner recently predicted it wouldn't be saved from Chapter 11, and he ought to know -- he's the airline's chairman.
But while most of the pundits are fixated on the reasons for US Airways' likely demise, one question has gone largely unasked: Who is going to pay for this failure?
Certainly, its employees will.
Since 2001, the company's rank-and-file workers have given up an unprecedented $1.9 billion in wages and benefits -- reductions they willingly accepted in order to keep US Airways flying. When the airline goes belly up, these loyal employees will also pay with their jobs.
But they aren't alone. The taxpayers will pay, too.
Loan guarantee
Let's start with the big number: $1 billion. That's how much money US Airways borrowed last year, supported by a $900 million federal loan guarantee, according to the Treasury Department. Although part of the loan has been repaid, the airline recently warned that it might default on the rest of it, according to a filing made with the Securities and Exchange Commission.
Here's another number to ponder: $264 million. That's the amount of aid the federal government gave US Airways after the Sept. 11, 2001, attacks as compensation for "direct and incremental losses incurred," according to the airline. (True, US Airways made less money when Washington-area airports were slow to reopen, but the airline didn't lose any planes 9/11.)
It would be one thing if the government subsidies had actually helped the carrier recover from the terrorist attacks. The amount was far too generous for that. Instead, it just subsidized an unprofitable airline and postponed the carrier's demise. Who paid for the botched government bailout of US Airways? Taxpayers did.
One more number to consider: $240 million. That's what the Retirement Systems of Alabama, the pension fund for Alabama's teachers and state employees, paid for a 37 percent stake in US Airways in 2002, an investment that helped the airline emerge from bankruptcy the last time. That stake was reportedly valued at less than half that amount just before the airline filed for its latest bankruptcy protection. If the carrier folds, it will probably be all but worthless.
Guess who foots the bill for that? Sure, Alabama's public employees do. But indirectly, so do the people who paid their salaries.
Retirement issues
Speaking of pensions, let's not forget US Airways' own retirement issues. The carrier recently asked for government permission to stretch out about $68 million in contributions it owes to its pensions over the next five years instead of the next 18 months. That would be a best-case scenario, actually. What if US Airways defaulted on its pensions -- as United Airlines recently threatened to do -- and then went under?
The government's Pension Benefit Guaranty Corp. insures that retirement money. Actually, taxpayers do.
Remember the carrier's jingle, "USAir begins with you"? Now it looks as if US Airways actually might end with you, with taxpayers paying for its complete failure to operate a competitive business. As America's travelers and taxpayers watch US Airways slowly die during the coming months, they should pay less attention to the pontifications of the analysts and the spin of the publicists and more to who is going to be left to clean up this mess.
Who is going to cover the loan losses? Who will pay for the bailout that didn't work? And what about the 27,848 suddenly jobless airline workers who will be applying for unemployment benefits? Who's going to pay? You.
X Elliott is National Geographic Traveler's ombudsman.