TCS Daily


Leaving, On a Jet Plane: Europeans Get Big U.S. Taxpayer Subsidy

By Melana Zyla Vickers - November 1, 2001 12:00 AM

Here's an act of Sept.11 charity that the average American is unlikely to be pleased to have participated in: By doling out a $15 billion aid package to U.S. airlines, the American taxpayer is in fact also bailing out... France.

And Germany, Britain and Spain. No sooner had the U.S. Congress announced its aid for airlines warning of bankruptcy, than the nation's second-biggest airline, United, confirmed it had placed a billion-dollar aircraft order with Airbus Industries. The French-German-British consortium receives heavy government subsidies to build its European aircraft and Airbus is U.S. aircraft maker Boeing's chief competitor.

United's move to spend around $840 million buying 15 new airplanes isn't objectionable per se. After all, replacing older aircraft is something airlines must routinely do. And U.S. carriers buying planes from Airbus has become almost routine - indeed United is Airbus's biggest global customer.

What's troubling is the timing.

United - and any other airline inclined over the coming months to buy Airbus aircraft - is doing so at a time when feelings about protecting American assets are running high. It won't be long before disgruntled members of Congress call the airline heartless -- or worse: unpatriotic -- for forking over giant sums to a European, government-backed company while the airlines are receiving help from U.S. taxpayers, laying off thousands of U.S. workers, and watching their own American cousin Boeing wallow in financial doldrums.

If the Euro-purchases get members of Congress really hot under the collar, they're liable to pass legislation requiring the airlines to buy American for the duration of their bailout.

To avoid that sort of regulatory forced-feeding, it would be far better at this sensitive time for United and others to follow the example of industry giant American Airlines and voluntarily buy U.S. planes. American Airlines has a track record of being Boeing's loyal customer. American even cancelled a $1.8 billion Airbus order placed by TWA after acquiring the airline earlier this year. American Airlines isn't the only entity trying to give Boeing's idling production lines a helping hand: The Department of Defense has scrambled this fall to use supplemental budget dollars to purchase two 767s from the aircraft maker. They'll be used as fuel tankers and for surveillance.

These are difficult times for the airline industry. Fear of flying after the Sept. 11 terrorist acts has led to thousands of empty seats on flights, prompting major carriers to slash their flying schedules by a third. The federal government's forced closing of airports after Sept. 11 also hurt the airlines. They estimated losses from September alone at around $5 billion. Boeing, already hobbled by slowing economies in Asia, can now expect a wallop from the U.S. as carriers scale back their expectations of how many people will be flying in the coming year and how many aircraft will be needed to transport them.

With prospects so thin, every aircraft order counts. Giving a contract to Airbus over Boeing can mean the difference between a U.S. worker having a job and losing it. Wherein lies the irony of United's European shopping spree: its unionized employees own The airline. One would have thought that union members, always quick to translate issues of international commerce into a calculus on jobs, would have understood better than most other taxpayers the value, this fall, of buying American first.

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