Friday, 21 September, 2001, 05:45 GMT 06:45 UK

US offers airlines $15bn aid

US airlines will be compensated for their losses

US leaders have agreed a $15bn aid package for the country's airlines industry, to ease a financial crisis stemming from last week's terrorist attacks. The agreement came after US President George W Bush, in an address to Congress, promised that "we will come together to promote stability and keep our airlines flying with direct assistance during this emergency".

US airlines and plane maker Boeing have cut more 100,000 jobs since the attacks, which has prompted a severe fall-off in trade.

Continental has said it will go bankrupt without government aid.

Aircraft were grounded for several days after the atrocities, and carriers have had to cut back schedules by 20% or more because of the declining number of air travellers.

Sky high deal

The package includes $5bn in direct grants to the airlines to compensate them for the losses suffered after the attack and $10bn in loan guarantees.

The aid comes on top of $3bn to upgrade security in airplanes and airports included in $40bn emergency spending that Congress approved last week.

European Union officials said on Thursday they would be looking closely at the US aid package, to see if they need to be matched in Europe.

"We do not want a situation where European airlines are placed in a disadvantageous position," Transport Commissioner Loyola de Palacio said.

Ms de Palacio is scheduled to meet her US counterpart Norman Mineta in Washington on Monday.

The House of Representatives is expected to approve the package, which also provides some liability protections for the airlines, on Friday and the Senate was expected to swiftly follow suit.

'Future threatened'

Airlines would also get war risk insurance for domestic flights, which currently only covers international routes.

Delta Air Lines Chairman Leo Mullin told the Senate Commerce Committee on Thursday that without government help, "the future of aviation is threatened."

He indicated that several major airlines are on the verge of bankruptcy.

The investment firm Morgan Stanley, in a letter to Treasury Secretary Paul O'Neill said there will be "no functioning capital markets for the US airline industry" unless the government provides "relief from what would surely be bankruptcy-inducing liability claims against carriers for collateral damage and loss of life" from the attacks.

While the two airlines involved in the hijackings, United and American, would be responsible for suits filed by the families of passengers on the planes, but the government would compensate victims on the ground.

-- Anonymous, September 21, 2001