The Dow Jones industrial average Monday recorded its largest point drop ever, and that sounds alarming. But, measured in percentage terms, the Dow's collapse on Black Monday in October 1987 was three times bigger; and the broader S&P 500 index recorded a decline Monday of less than 5 percent. Of course, it's possible that nastier falls await. But for the moment the main cause for alarm lies not the in level of the overall market but in the state of the airlines.
The airline business faces daunting problems. It lost millions in revenue last week. Frightened passengers are canceling reservations. United Airlines and American, the two companies whose jets were hijacked, face hugely costly lawsuits, both from the owners of the damaged buildings and from survivors' relatives. The transformed perception of all carriers' future legal liability may hobble the industry. Tougher airport security will push up costs.
Both Congress and the administration are anxious to help. Government has a long history of sponsoring citizens' mobility. But a bailout would simply transfer the cost of the disaster from air passengers and airline stock holders to the broad ranks of taxpayers. Government cannot magically hold everybody harmless, however much it might want to.
There is a strong case for helping the industry deal with the cost of liability. The lax security standards at airports reflected lax government regulations, so it is fair for government to shoulder at least part of the resulting financial burden. Congress should accept some liability costs. It should also pass legislation to ensure that liability payments are held to a reasonable level and that trial lawyers do not pocket large chunks of the money.
Beyond that, however, the case for bailout is weaker. Some argue that government should compensate the airlines for lost business in the future, or that it should pay for all of the new security measures that it will soon mandate. But much of the extra cost should show up in higher ticket prices rather than be disguised by providing public subsidies. Terrorism has driven up the cost of air travel, and part of the nation's response may be to fly less -- to rely on phone or video conference for business, or to travel by train or car where possible. In the long term, Congress ought not disguise this tough reality by throwing money at the airlines, even if it may choose to help them through the immediate crisis caused by last week's outrage.
-- Washington Post
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