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Airlines want tax cut if war slows travel

Airlines are slashing costs but still need billions in tax relief to avoid chaos and bankruptcy if the United States goes to war against Iraq, the Air Transport Association said Tuesday.

Congress gave the airline industry $5-billion in cash when many people stopped flying after the Sept. 11, 2001, terror attacks.

The size of that relief package, which included a $10-billion loan guarantee program, dampened lawmakers' appetite for giving the airlines the $9-billion in tax cuts they say they need, said Steve Hansen, spokesman for House transportation committee chairman Don Young, R-Alaska.

"It's not to downplay the problems the aviation industry is having, but at what point do you set a limit to how much you can give to one industry?" Hansen said.

The airline association predicted that during a war, passenger traffic would fall more sharply than in the 1991 Persian Gulf War. Airlines would lose $10.7-billion, nearly 10 percent of daily flights would be canceled and 70,000 airline jobs would be cut, the association said.

That scenario was based on recent bookings, data from the last war and assumptions about the economy and passenger behavior.

"We're in a crisis," said James May, the association's president. He said the airlines weren't asking for a bailout, but for help in withstanding the consequences of war.

If the worst happens _ a major terrorist attack occurs when war breaks out _ the biggest airlines could collapse, May said.

Darryl Jenkins, head of George Washington University's Aviation Institute, said those forecasts are reasonable but Congress is unlikely to help any distressed industry twice. A war will simply accelerate the inevitable shrinking of airline capacity and leave the survivors stronger, he said.

The Gulf War led to the liquidation of Eastern, Pan American, Midway and Markair airlines, the association said. Now, United Air Lines and US Airways are in bankruptcy and all others except Southwest Airlines are losing money.

The airlines want a holiday, beginning with the start of the war and ending one year after it ends, from six taxes they pay into a trust fund. They also want the government to pay for airport security improvements, since they are a matter of national defense.

Lawmakers may be willing to extend war-risk insurance, which protects airlines from liability claims for injuries resulting from war or terrorism, Hansen said.

Major airlines lost $7.7-billion in 2001 and more than $10-billion in 2002.