Air Transportation Stabilization Board (ATSB)

The Air Transportation Stabilization Board (ATSB) was created by the Air Transportation Safety and System Stabilization Act, which was signed by President George W. Bush on September 22, 2001, for the purpose of issuing federal loan guarantees to airlines experiencing financial difficulties following the terrorist attacks of September 11, 2001. As of May 2005, seven airlines have been granted such guarantees and nine airlines have been denied.

Applicants must meet three criteria under the act: (1) the airline is unable to obtain a loan without the guarantee, (2) the amount of the loan is prudent, and (3) the guarantee is necessary for a viable air transportation system in the United States. ATSB often demands stock warrants or related securities, giving the government an ownership stake in those airlines whose loans are guaranteed.

The creation of ATSB has been surrounded by controversy from the beginning. Although the terrorist attacks of 2001 clearly caused a drastic drop in airline patronage, it is debatable whether the proper role of government is to aid failing businesses. Some airlines that received guarantees were losing money prior to the 2001 attacks, in which case the government is inadvertently rewarding mismanaged airlines while better managed airlines do not enjoy the same benefits. Also, one could argue that it was unfair to single out one industry for federal assistance due to the terrorist attacks. What about New York hotels and theaters? What about restaurants and other service providers who rent space in airports? If federal assistance is available to airlines, one could argue that it should be equally available to all businesses directly affected by the terrorist attacks.

Another objection to ATSB, rooted in broader ideological concerns, comes from those who believe government should never interfere with free market processes. Airlines have the responsibility to plan for terrorism and other traumatic shocks to the industry, and it could be argued that airlines that were inept in their planning deserve to fail so that more competently managed airlines can take their place.

In contrast, there are strong arguments in favor of ATSB rooted in the premise that it is proper for government to ameliorate the harm caused by terrorism. Generous government aid was made available to individuals harmed in the 2001 attacks, so perhaps aid should likewise be offered to affected companies. The airlines were treated differently than, for instance, airport restaurants, because a slew of restaurant closures would not threaten the U.S. economy as much as the collapse of the airline industry.

Also, it should be emphasized that ATSB does not give loans; it merely guarantees the loans made by others. The government is responsible for the debt only if an airline defaults on its loan, which should not occur if ATSB's criteria are properly applied. ATSB's cautious approach is illustrated by the fact that it has rejected over half the airlines that have applied for loan, including the large and financially troubled United Air Lines.