CHARLOTTE, N.C. -- Government backing can save ailing companies, even help to make them viable. Just ask US Airways (LCC).
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.
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.