CHARLOTTE, N.C. -- Government backing can save ailing companies, even help to make them viable. Just ask
In 2001, in the aftermath of the Sept. 11 terrorist attacks, which worsened an increasing drop-off in air travel, Congress created the Air Transportation Stabilization Board, equipping it with the power to guarantee loans to keep airlines afloat.
The precedent is a valuable one, as
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at a critical time in their history.
US Airways was by far the biggest beneficiary of the ATSB. In 2002, it was awarded a $1 billion loan, of which the ATSB guaranteed $900 million. The loan helped it to survive two bankruptcies and eventually to engage in a successful merger. Merger partner America West was also an ATSB client, receiving a $429 million loan in 2001.
Today, US Airways is prospering -- to the extent that airlines prosper -- and the ATSB has shut down, its work completed. In the US Airways deal alone, the board made more than $300 million in fees, interest and profit on the sale of warrants, and it saved the nation's seventh-largest carrier.
"Both these airlines would be nonexistent had they not merged," said US Airways CEO Doug Parker, in a recent interview. "But merged, we saved 35,000 jobs."
Then, a sharp drop in traffic highlighted structural flaws in the airline industry, and lenders shied away from carriers. Now, a sharp drop in spending highlights structural flaws in the auto industry, and lenders shy away from everybody.