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AVIATION ASSISTANCE: COMPENSATION CRITERIA AND PAYMENT EQUITY UNDER THE AIR TRANSPORTATION SAFETY AND SYSTEM STABILIZATION ACT

Section 824 of the Vision 100 - Century of Aviation Reauthorization Act 4 requires that the General Accounting Office (GAO) report on the criteria and procedures used by the U.S. Department of Transportation (DOT) to compensate air carriers under the Air Transportation Safety and System Stabilization Act (Stabilization Act) emergency assistance program with a particular focus on whether it is appropriate to compensate air carriers for the decrease in value (asset impairment) of their aircraft after September 11, 2001, and to ensure that comparable air carriers receive comparable percentages of the maximum compensation payable. DOT published its criteria and procedures in a series of guidelines and regulations promulgated between September 2001 and August 2002. The DOT regulations relevant to asset impairment and comparable compensation, among others, are the subject of a suit pending in the U.S. Court of Appeals for the District of Columbia Circuit. Since DOT's regulations are subject to the court's review, GAO will not specifically address the appropriateness of DOT's criteria and procedures as they relate to these matters. In light of the ongoing litigation, GAO met with congressional staff and agreed that GAO would (1) describe the measure(s) by which the air carriers were compensated under the Stabilization Act as well as DOT's criteria and procedures, such as policies on impairment, established to administer the program and (2) determine if there are possible scenarios under which air carriers, comparable in size and type (cargo or passenger), conceivably could receive different levels of compensation. Briefly, Sections 101 and 103 of the Stabilization Act established three criteria on which to base air carriers' compensation amounts: (1) direct losses incurred as a result of the federal ground stop order and incremental losses incurred from September 11 through December 31, 2001, as a result of the terrorist attacks; (2) carrier type (e.g., passenger or cargo); and (3) a calculated formula amount based upon each carrier's percentage of industry capacity and the total amount of compensation available under the legislation. Because the statute required that the maximum air carrier compensation amounts be equal to the lesser of direct and incremental losses as determined by DOT or this formula amount, the formula effectively "capped" the amount of compensation an air carrier could receive for its September 11-related losses. A number of factors influenced the amount of compensation air carriers ultimately received under the Stabilization Act. Conceivably, these factors could result in scenarios in which comparable air carriers could have received different levels of compensation. For example, two air carriers could have comparable losses related to September 11, but be subject to different formula caps because they had different capacity levels. If one or both carriers had losses that exceeded the formula amount, the formula would cap the compensation amount at different levels.

Language

  • English

Media Info

  • Features: Figures; Tables;
  • Pagination: 17 p.

Subject/Index Terms

Filing Info

  • Accession Number: 00976285
  • Record Type: Publication
  • Report/Paper Numbers: GAO-04-725R
  • Files: TRIS
  • Created Date: Jul 7 2004 12:00AM