General Aviation Reparations Act of 2001: Help on the Way?
Financial assistance may be coming soon to aviation businesses that
suffered economic injury as a result of the nationwide airspace
restrictions post-September 11, 2001. On February 28, 2002, the House
Committee on Transportation and Infrastructure approved the General
Aviation Reparations Act of 2001 (H.R. 3347 or "GARA").
The GARA would provide $2.5 million in grant funding and $3 billion in
loan guarantees to fixed-based operators, flight schools, general
aviation manufacturers, non-scheduled commercial aviation operators and
general aviation airports. The funds would be available through and
administered by the Air Transportation Stabilization Board. This is
the same board established by congress to administer the grants and
loans previously made available to the airlines.
To qualify for compensation, an aviation business will be required to
submit proof of direct and incremental losses sustained as a result of
the ground-stop order on September 11, 2001 and any subsequent
stoppage. The bill also provides the President with the authority to
give priority to an aviation business based upon the length of time the
business has been unable to operate.
Although the "direct" losses component seems clear, unfortunately the
bill does not define "incremental" losses. Thus, it is unclear exactly
how broadly this compensation may apply to aviation operations.
However, it is reasonable to assume that an aviation business, such as
an FBO, will be entitled to compensations for losses directly related
to lost flight instruction, aircraft rental and charter, fuel sales and
perhaps increased insurance costs as well.
The loan guarantee provisions of the GARA are available to aviation
businesses where 1) credit is not reasonably available to that entity
at the time of the transaction; and 2) the intended obligation by the
aviation business is prudently incurred. This program will be operated
in conjunction with the Small Business Administration. Application
will be made to the Board along with supporting documentation and any
additional information the Board may request.
The bill's language vests the Board with a great deal of discretion to
make its decisions. This became apparent with the interaction between
America West and the Board during the processing of its application
under the Air Transportation Stabilization Act. America West was
required to make numerous concessions to satisfy the Board. Since that
time only a few airlines that have actually applied for loan guarantees
and it is unclear whether this program is actually providing the
benefit anticipated by congress. Thus, with the Board administering
the loan program under the GARA, it is similarly unclear whether the
GARA loan guarantees will provide the relief promised and be available
What can you do now? First, contact your representatives and senators
to urge them to co-sponsor and support the GARA. Contact Minnesota
congressmans Gutknecht, Kennedy, Luther, McCollum, Oberstar, Peterson,
Ramstad, and Sabo to urge them to vote for the bills. Additionally,
Oklahoma Senator Inhofe introduced a companion bill to the Senate that
contains the same language as the GARA. So contact Senators Dayton and
Wellstone to encourage their support of the companion bill. Both house
and senate bills still have several votes to go before they become law.
Second, calculate your losses and gather your documentation and proof to
support those losses. Financial statements showing past, present and
budgeted or expected revenue, as well as any other documentation
evidencing the losses will be necessary to prove the losses to the
satisfaction of the Board.
Third, if you are interested in pursuing loan guarantees, you will need
all of the documentation typically required by the Small Business
Administration for an SBA loan. Some of these documents will include
financial statements, corporate organizational documents, letters of
counsel and a business plan containing an explanation of the intended
use of the loan proceeds. The key to success will be the thoroughness
and completeness of the financial and business information you prepare
and submit in support of your application. Start now and you will be
ready to take advantage when the GARA becomes law.
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