NEW YORK (AP) -- Three decades ago, deregulation wiped out much of the government's heavy-handed control over the U.S. airline industry. Now some of Uncle Sam's control is creeping back in.
Just this week, the federal government's Pension Benefit Guaranty Corp. agreed to take over United Airlines pensions in exchange for a financial stake in its parent company, UAL Corp. The move is key to the struggling airline's attempt to emerge from bankruptcy.
And that's not the only example of the government's growing influence in the industry. Federal agencies are involved in everything from offering loan guarantees to bail out airlines in times of trouble to overseeing security at the nation's airports.
Some might argue this isn't the kind of control that the U.S. Airline Deregulation Act looked to root out when it was passed in 1978. That legislation was intended to allow free markets, not the government, to decide fares and route designations.
The spirit of that law was also to keep the government from meddling in the process of sorting out winners and losers in the airline business - and it's that point that's raising some eyebrows today.
''Airlines should succeed or fail on their own endeavors. It isn't the place of government to prop up a failing management,'' said Darryl Jenkins, an independent airline consultant in Marshall, Va.
But the government shouldn't get all the blame for its increasing control. Airlines seem to run to federal authorities begging for help every time their business hits a bump, and ultimately U.S. taxpayers end up with the tab.
Consider what is going on at United. A federal bankruptcy judge on Tuesday approved the airline's plan to terminate pension programs that cover 120,000 active and retired workers, clearing the way for the largest corporate-pension default in U.S. history.
Cash-strapped United will save an estimated $645 million (euro510.5 million) a year from unloading its four defined-benefit plans on the PBGC, the government's pension insurer. United's pension funds have $7 billion (euro5.5 billion) in assets, but benefit liabilities total $16.8 billion (euro13.3 billion). Of that $9.8 billion (euro7.8 billion) difference, the PBGC will cover $6.6 billion (euro5.2 billion).
Had the PBGC rejected this deal, it would have made it nearly impossible for the airline to emerge from Chapter 11 bankruptcy protection as soon as this fall. Instead, the agency reversed its initial opposition in exchange for up to $1.5 billion (euro1.2 billion) in notes and convertible stock in a reorganized UAL Corp. The PBGC also expects that it will receive equity in UAL on its claim for unfunded benefit liabilities.
While the size of the PBGC's overall stake in United won't be known until the airline finalizes its bankruptcy reorganization plan, its holdings will likely give it some significant influence over decisions at United in the years ahead.
The government also exerts control through the Air Transportation Stabilization Board, the federal agency created after the Sept. 11 terrorist attacks to help struggling airlines recover from a severe downturn.
The ATSB has issued about $1.6 billion (euro1.3 billion) in loan guarantees to six carriers, and those loan guarantees carry with them warrants of between 10 percent to 33 percent of the airlines' equity.
Among those that were granted the loan guarantees: US Airways Group Inc. and American West Holdings Corp., which have confirmed recently that they are in merger talks. The ATSB has authority to approve or reject any merger under the terms of its loan agreement.
There are also instances when the ATSB has agreed to extend the terms of an airline's loan guarantee rather than call the carrier on the note should it not be able to pay. By doing that, the government allows an airline to stay afloat when its business is near failure.
In January, for instance, a bankruptcy judge extended an agreement that allowed U.S. Airways to fund its operations with cash pledged as collateral on a $900 million government-backed loan. The previous agreement with the ATSB was set to expire Jan. 15, but the decision would extend the agreement through the end of June.
''(The government) has huge influence at those companies not because they have voting stakes, but because of the covenants in those loan agreements,'' said Philip Baggaley, the airline analyst at Standard & Poor's.
There are some who argue that increasing government control is a good thing. Federal intervention has helped save thousands of jobs, and kept competition alive at some airports, which should mean lower fares for passengers.
But, on many levels, it also gives the government power to decide who gets to compete.
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Rachel Beck is the national business columnist for The Associated Press.
