By Ga-Young So, USCM Intern
July 25, 2005

With the U.S. airline industry continuing their unprecedented financial losses since 2001 and amid growing concerns of operational inefficiencies with explosive detection machines in airports, the Senate Commerce, Science and Transportation Subcommittee and House Homeland Security Subcommittee held separate hearings July 13 on these major issues.

Highlighting continued financial weakening in the airline industry, in particular the legacy airlines, Senate Commerce, Science and Transportation full committee Chairman Ted Stevens (AK), highlighted rising fuel costs, and lost jobs linked to airline industry bankruptcies.

Speaking for the U.S. Government Accountability Office (GAO), JayEtta Z. Hecker, Director, Physical Infrastructure Team, said “Since 2001, the U.S. airline industry has confronted financial losses of unprecedented proportions.”

“From 2001 through 2004, legacy airlines reported losses of $28 billion, and two of the nation’s largest legacy airlines – United Airlines and U.S. Airways – went into bankruptcy, eventually terminating their pension plans and passing the unfunded liability to the Pension Benefit Guaranty Corporation,” said Hecker.

Hecker noted “Two other legacy airlines have announced that they are precariously close to following suit.”

The preliminary GAO report found that U.S. legacy airlines have not been able to reduce their costs sufficiently to profitably compete with low cost airlines that continue to capture market share. As a result, legacy airlines have continued to lose money – $28 billion since 2001.

The GAO study points out that bankruptcy reorganization does not contribute to the industry financial problems as has been suggested by industry observers. According to the report, bankruptcy is endemic to the industry; 160 airlines filed for bankruptcy since deregulation in 1978, including 20 since 2000. Most airlines that enter bankruptcy have not survived according to GAO.

The third key point in the GAO report is that while bankruptcy may not harm the financial health of the airline industry, it has become a cause of considerable concern for the federal government and airline employees and retirees because of the recent terminations of pensions by U.S. Airways and United Airways.

The House Homeland Security Subcommittee on Economic Security, Infrastructure Protection, and Cybersecurity hearing on “Leveraging Technology to Improve Aviation Security” highlighted a GAO report on optimizing deployment of checked baggage and screening systems.

Before reviewing the report, subcommittee members stressed how frustrating it is to go through security process at airports and urged improvement.

The GAO found that TSA has made substantial progress in installing explosive detection systems (EDS) and explosive trace detection (ETD) systems at the nation’s 400 airports to provide the capability to screen all checked baggage using explosive detection systems.

However, the GAO report found that interim lobby solutions for stand-alone ETD and minivan sized EDS machines resulted in operational inefficiencies, including requiring a greater number of screeners, as compared with using EDS machines in line with baggage conveyor systems.

According to the report, TSA and airport operators are taking actions to install in-line baggage screening systems to streamline airport and TSA operations. Eighty'six of the 130 airports, according to the GAO report, either have, are planning to have, or are considering installing full or partial in-line systems.

Nearly four years since September 11, The United States Conference of Mayors is concerned that the overall costs of installing in-line baggage screening systems at each airport are unknown, the availability of future federal funding is uncertain, and perspectives differ regarding the appropriate role of the federal government, airport operators, and air carriers in funding these systems, according to GAO.

To view both GAO reports, go to the website: www.gao.gov.