Gregory J. Reigel
Serving clients throughout the U.S.
Tel (214) 780-1482

[Top Background]
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 as intended.

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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