October 10, 2001

THE AIRLINES

Bailout Showed the Weight of a Mighty, and Fast-Acting, Lobby

By LESLIE WAYNE and MICHAEL MOSS

Just one day after terrorists hijacked and crashed four commercial jets, lobbyists for the airline industry were already at work, laying the groundwork for a multibillion-dollar plan to rescue the industry.

With the airlines grounded and passengers fearful of flying, platoons of well-connected and highly experienced lobbyists — among them Linda Hall Daschle, wife of the Senate majority leader — began sorting through their options, perhaps a ticket tax, perhaps something else. But, as Mrs. Daschle, an American Airlines lobbyist, explained, the group quickly settled on the simplest plan: a cash payment and loan guarantees.

That was the start of a campaign to convince Congress that the industry needed government support to survive. The speed with which Congress agreed to $15 billion in aid and loan guarantees just 11 days after the terrorist attack is not just a testament to the importance of air travel to the nation's economy. It is also an example of the power of the airline lobby, and the skill with which it marshaled its resources.

"It was masterful," said Senator Peter G. Fitzgerald, an Illinois Republican who cast the lone vote in the Senate against the airline rescue package. "The airline industry made a full-court press to convince Congress that giving them billions in taxpayer cash was the only way to save the republic."

For an industry that is hardly the most popular in Congress — or with the flying public — it often manages to get what it wants in Washington. In what one federal regulator called "a wonderful piece of special pleading," the airline lobby in the aftermath of the 1988 Pan Am 103 bombing succeeded in weakening measures to toughen airport security.

More recently, the airlines helped head off a passengers' bill of rights. And this spring, the airlines scored big when President Bush invoked rarely used powers to block a threatened strike by airline employees.

This time, a mere 24 hours after the Sept. 11 terrorist attack, with the nation still shocked and grieving, the airlines moved quickly on the ground, if not in the air. By the evening of Sept. 12, the carriers had joined in a unified effort to persuade Congress they needed federal aid.

The airlines had plenty of resources to draw on: 27 in-house lobbyists, augmented by lobbyists from 42 Washington firms. The lineup included former White House aides and transportation secretaries, retired members of the House and Senate, and a former Republican National Committee chairman, Haley Barbour. The airlines also had at their disposal a Continental Airlines (news/quote) lobbyist, Rebecca Cox, who is a former Reagan administration official and the wife of Representative Christopher Cox, a California Republican.

And in the front lines were the airlines' own chief executives, well known in the halls of Congress, and corporate board members — many of whom were Bush campaign contributors. Among them were Donald J. Carty, the chief executive of AMR, the parent of American Airlines, and Gordon Bethune, chief executive of Continental, both of whom are based in Texas and have known Mr. Bush well for years, and Leo F. Mullin, chief executive of Delta Air Lines (news/quote).

"It was the most high-level surgical strike that I have ever seen," said Jeff Munk, a partner at the Washington law firm of Hogan & Hartson and a lobbyist for General Electric (news/quote), which makes jet engines and leases aircraft. "And the people who made it happen were the C.E.O.'s."

The airlines had some strong arguments to make. The government had grounded their planes for security reasons, hurting the nation's fragile economy, while costing the airlines millions of dollars in lost revenues. Besides, in practically every district, industries related to the airlines — travel and tourism — were suffering, too, making it easier for the airline lobbyists to make their case.

In Congress, "everybody was stunned by what happened," Mrs. Daschle said. "Everybody wanted to help." Mrs. Daschle, who advised both American and Northwest Airlines (news/quote), said she was careful not to lobby her husband or his Senate colleagues. But House members said she held face-to-face meetings with House Democrats.

Not everyone approved of the industry's aggressive tactics in seeking more money than it lost in the three-day shutdown while excluding its own employees from the bailout.

"The big *** got the bone," said Representative George Miller, a California Democrat. "After Sept. 11, the mood was one of shared sacrifice. People had lost their jobs and their lives. And the first thing that happened was the airline industry came in while everyone else is waiting to see if they can make their mortgage payments."

To get what they wanted quickly, the airlines concentrated their efforts on a few crucial Congressional leaders, including the House Democratic leader, Richard A. Gephardt, and top administration officials, including the transportation secretary, Norman Y. Mineta, and Andrew H. Card Jr., the president's chief of staff.

"All the lobbying was focused on a handful of people at the top," said Representative Lloyd Doggett, a Texas Democrat. "Even the members of the Transportation Committee didn't know what was going on."

As a result, on the night of Sept. 14, at a time when House members had been told to go home for the day, a two-page bill that would have authorized Congress to give the industry $12.5 billion almost passed by unanimous consent in a nearly empty House chamber around midnight.

Only through the lone objection of Mr. Doggett, who happened to be on the floor that night, was the measure stopped.

For that, Mr. Doggett faced the wrath of an airline lobby willing to play tough and get personal. Continental Airlines, based in his home state, began an automated telephone campaign with Mr. Doggett as its target after Mr. Bethune, Continental's chief executive, said Mr. Doggett was to blame for any layoffs.

Pressure on Congress to pass a rescue package increased, meanwhile, as Continental and other airlines began to furlough tens of thousands of employees.

Any industry that can put that many people on the street "is going to get attention of people at the highest levels," said one staff member of the House Aviation Subcommittee. "Their tactic was to bring all their top guys to meet with top people in government and to say the sky is falling."

To bolster their case, board members of the six major airlines began calling leading members of Congress and the administration. A Continental director and Houston pastor, Kirbyjon Caldwell, who phoned three senators on Sept. 19, said the airline bailout was needed to help convert "a moment of fear to a moment of faith." An American Airlines director, John W. Bachmann, a Missouri financier, called two members of his state's delegation — Mr. Gephardt and Representative Roy Blunt, the Republican who helped write the bill — to say the airlines' losses were "breathtaking."

Many of these board members were also big campaign contributors. American's board members alone gave $148,200 to Republicans in the last presidential election, while the boards of four airlines — Delta, United Airlines, Continental and American — gave a total of $712,569 in soft- money donations to both parties. And, American gave another $100,000 to the Bush inauguration.

A United board member, Richard McCormick, gave Republicans $98,000, A Continental board member, Richard W. Pogue, gave Republicans $40,000 and David Bonderman, also on the Continental board, gave $110,000 to the Democrats, according to the Center for Responsive Politics, a Washington research group.

The airlines also benefited from the push for the bailout bill provided by airline executives, like Mr. Carty of American and Mr. Mullin of Delta, who routinely work the halls of Congress themselves and made personal visits throughout Washington. One reason they were well received: since 1998, the industry over all has given $7.4 million to Republican candidates and committees, and $4.6 million to Democrats.

In what some lobbyists called a master stroke, the airline industry was able to double the amount of direct aid it had initially sought by agreeing to forgo loan guarantees, which they ultimately got anyhow.

Meanwhile, even in a Democratic- controlled Senate, the pleas of organized labor to protect airline employees were pretty much ignored. "We are upset that the crisis with the airline workers was not addressed along with the crisis with the airlines," said William Samuel, a lobbyist for the A.F.L.-C.I.O.