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Air America

Travel isn't a luxury; it's the backbone of the service economy. And for Congress, which is toying with tax incentives to get people flying for the holidays, it's nearly a national-security issue.

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Hours after Flight 587 slammed into Queens, a 33-year-old EPA lawyer named Raho Ortiz boarded a US Airways flight from Pittsburgh to Washington National. Fifteen minutes before landing, Ortiz got up to use the bathroom. That turned out to be a big mistake. Getting up is banned within half an hour of takeoff or landing at National. According to the Washington Post, Ortiz was immediately jumped by two sky marshals, one of them holding a gun.

"I'm sorry, I'm sorry," he yelped. "I just wanted to go to the bathroom."

No such luck. Ortiz was handcuffed. The plane was diverted to Dulles airport. The rest of the passengers, meanwhile, were told to place their hands on their heads, and then on the seats in front of them, until the plane landed. Some believed they had been hijacked by the plainclothes sky marshals. Once on the ground, Ortiz was arrested by the FBI and charged with a federal crime. (Those charges were dropped but Ortiz was quickly charged by airport police with misdemeanor marijuana possession charges.)

Ortiz was released several hours later with a valuable life lesson (on short flights, forgo that second Diet Coke). But what did the other passengers learn? That the government is doing everything it can to make air travel safe? Or that flying has become frightening, unpredictable, and full of unwelcome drama? In other words, how many passengers came away eager to book another flight?

These are questions that airline executives have spent a lot of time thinking about lately. The problem isn't that flying is dangerous; it's undoubtedly safer now than at any time in history. The problem is that thanks to the security that makes it safe, flying seems scarier than ever. The health of the entire travel and tourism industry -- collectively the third-largest employer in the United States -- depends on reversing this perception.

How can we do it?

First, get the president of the United States to appear in an industry-sponsored television commercial. Sitting presidents don't generally do testimonials for profit-making enterprises; it's not clear that one ever has. But in the weeks after September 11, travel-industry representatives (reportedly led by hotel mogul Bill Marriott) contacted Karl Rove at the White House and asked for help. Rove agreed to provide it. The result was an ad paid for by the Travel Industry Association of America that contains footage from Bush's post?September 11 address to the joint session of Congress. The message to Americans: The president wants you to hit the road, and spend money as you do. The White House seems pleased with the commercial. The industry, however, plans to hold it until coverage of Flight 587 subsides.

From exhorting Americans to travel, it's a short step to paying them to do it. Enter the "personal travel credit." A bill introduced in the Senate by Georgia's Zell Miller and Arizona's John Kyl would make the first $500 of domestic-travel expenses ($1,000 for a couple filing jointly) fully tax-deductible, if those tickets are paid for by the end of this year. The idea, obviously, is to keep the travel industry from collapsing over the holidays.

Some version of the bill will probably wind up in the stimulus package, mostly because it has no organized opposition. Airlines, hotel owners, travel agencies, rental-car companies, and visitors' bureaus like it. So does labor. So will travelers, who, whatever their fears about safety, still make rational economic decisions. (Why cancel the trip to Boca if it's not going to cost you anything? And while you're at it, why not buy your spring-break tickets now?) The bill's sponsors in Congress, meanwhile, can claim with a straight face and some justification that the bill is not a corporate handout. It's an incentive for Americans to get on with their lives, to display courage in the face of terrorism. Plus, it's pro-family. Who's against holiday vacations?

The only problem with the personal travel credit is, it won't fix the airlines. The industry was already on the road to losing billions this year. September 11 dramatically accelerated the loss. (United alone lost more than $2 billion just last quarter.) The $5 billion cash infusion from Congress this fall helped, but it's not the answer, either.

In fact, American carriers have had a tough time remaining profitable since at least 1978, when they were deregulated. There are many reasons for this, including too many flights on already well-served routes and poor management. But one of the main reasons is the high cost of labor. Thanks to the influence of the pilots' union, pay scales are generally tied to the size of aircraft: The bigger the plane, the bigger the salary. A senior pilot at the controls of a Boeing 777 can pull in $300,000, flying 145 days a year. A starting co-pilot flying a prop jet for a regional carrier might make in the vicinity of $20,000.

If you're a pilot, you're obviously going to choose the JFK?Hong Kong gig over Traverse City?Grand Rapids if you can. But there's another effect of this cost structure: It favors smaller carriers. Southwest is the only major airline that turned a profit last quarter. Unlike the others, Southwest does not operate on a hub-and-spoke system. It flies point to point, and it can cherry-pick the profitable routes. But Southwest has another advantage: It doesn't use large planes. Which means it doesn't pay huge salaries.

This is a sensitive subject for airlines. The recent congressional bailout contained, in addition to cash, another $10 billion in loan guarantees. These could be helpful, but so far no airline other than America West has chosen to accept them. The reason: They come with federal oversight and regulations, including some that might force concessions from labor. Why is the guy with the plastic bag who comes on to clean the seats after the plane lands making $40,000 a year? Why are he and other custodians represented by the machinists' union? If they accepted loan guarantees, the airlines might have to answer these questions. They don't want to.

They may go bankrupt instead. This is not as dramatic as it sounds. "They were already going bankrupt," says a longtime industry analyst. "Airlines are very good at flying in bankruptcy. Once you go into bankruptcy, you can get financing. It takes them a long time to die." There's a feeling among those who watch the industry that consolidation is part of a natural and not unhealthy process. It may be that there are too many airlines. Some of them probably should die or get eaten by their competitors. It's not as if the entire industry would go under. Congress would never allow it. "What do members of Congress do every Thursday afternoon?" asks one aviation expert. "These people fly a lot. They're frequent fliers."

Which is also part of the problem. Congress is too interested in the airlines, too emotionally invested in the issue. Occasionally, this can be helpful (because a key member of the House Transportation Committee lives in Alaska, Washington National now has a direct flight to Seattle). More often, it is not.

At a speech in Atlanta a couple of weeks ago, President Bush pledged to keep National Guardsmen stationed at airports. This was meant to reassure the country. It didn't calm members of Congress. Representatives Robert Menendez, a Democrat from New Jersey, and Nancy Pelosi, the Democratic minority whip from California, among others, promptly went on television to declare that this wasn't enough. As airline passengers, even in the presence of soldiers with machine guns, they didn't feel safe. The implication: Air travel is that terrifying. It was enough to make you want to cancel that trip to Boca.


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