Bill on Airline Takeovers May Hit Bush Veto

WASHINGTON — The Bush Administration today threatened to veto legislation due on the House floor later in the week to give the Transportation Department the power to reject the leveraged buyouts of domestic airlines.

The warning from the Transportation Department was issued during a House Ways and Means oversight subcommittee session examining the tax implications of the buyouts--often financed with heavy debt that can be deductible. The panel got conflicting advice on the issue of restricting the interest deduction on such debt.

The legislation under direct veto threat would require that those who want to buy an airline get the department’s approval before buying more than 15% of an airline’s stock.

Patrick Murphy Jr., a Transportation Department policy official, told the panel’s oversight subcommittee that the department “neither needs nor wants such authority” to block takeovers and said Secretary Samuel Skinner has recommended a veto for the bill.

Rep. Byron Dorgan (D-N.D.) has proposed legislation to restrict the interest deduction on buyouts to the first $100 million in debt.

“I fear that putting major airlines ‘in play’ in this game of speculation as practiced by the fast-buck artist will seriously damage airline companies that so many people rely on for their transportation needs,” Dorgan told the subcommittee.

Morten Beyer, head of Avmark, an air transportation consulting firm, told the subcommittee that the takeovers “have no redeeming economic or service advantages to the airlines, their employees and . . . the traveling public,” and takeovers of five strong airlines would load them down with $30 billion in debt that “will transform them into the equivalent of a Third World country.”

Bill Hoffman, secretary-treasurer of the Independent Federation of Flight Attendants, endorsed Dorgan’s bill.