This afternoon, the President signed the Emergency Wartime Supplemental Appropriations Act, 2003. Title IV provides for nearly $2.4 billion in financial aid for the U.S. airline industry, a four-month suspension of the security-related fees imposed on both passengers and air carriers, and extension of the war risk insurance program through September 30, 2004. The major provisions are discussed below.¹  

Every U.S.-flag air carrier that has collected and remitted passenger security fees or paid air carrier security fees will get some of these funds.

By no later than May 16, 2003, U.S.-flag air carriers will be paid $2,295,750,000 to be allocated on the basis of "the proportional share each such carrier has paid or collected as of the date of enactment of this Act in passenger security and air carrier security fees to the Transportation Security Administration."

Although the language is somewhat unclear, it appears to contemplate that the distribution will be allocated on the basis of both the Part 1510 passenger civil aviation security service fees collected by air carriers (e.g., the $2.50 per segment "September 11^th" fee) and the Part 1511 aviation security infrastructure fee imposed directly on the air carriers (the fee based on CY 2000 security costs for each air carrier). The Conference Report is clearer in that regard in stating that that the allocation shall be based on "the proportional share of expenses incurred related to aviation security each such carrier has paid or collected."

Unlike the distribution of the $5 billion in direct aid in the fourth quarter of 2001, this distribution will be quick with relatively little paperwork required. Indeed the only mandatory pre-distribution paperwork will be a contract between the federal government and the recipient that applies certain limitations on the compensation of the recipient’s executive officers through March 31, 2004. Note that the contract requirement applies more as the exception than the rule, i.e., it does not apply to air carriers that exclusively operate aircraft with 85-seats or less, any Hawaii-based carrier or to any carrier that does not operate trans-Pacific or trans-Atlantic flights.

The Act does not limit how each recipient may use the funds. However, the Conferees commented that these funds are to be used "to the greatest extent practicable" for carrying out security-related functions. Additionally, the Conferees "expect" that each recipient will "transmit a plan to the Comptroller General [by July 15, 2003] to reduce that air carrier's annual operating expenses by an amount equal to the greater of 10 percent of that carrier's annual operating expenses or the amount of financial assistance that the carrier has received under this heading."

The Act appropriates $100 million to reimburse U.S.-flag air carriers "for the direct costs associated with the strengthening of flight deck doors and locks on aircraft required by [the Aviation and Transportation Security Act]." There is no provision for how or when this will be distributed or how it will be allocated. These finds are in addition to the $100 million that the FAA already has disbursed to air carriers for this purpose.

The $2.50 per segment passenger security fee and the air carrier security fee based on CY2000 security expenditures will be suspended from June 1 through September 30, 2003. This applies to both U.S.-flag and foreign air carriers.