House bill to bailout airline industry defeated

Continental and several other airlines said they will cut their flight schedules by 20 percent.

By Ted Barrett
CNN Washington Bureau

WASHINGTON (CNN) -- An effort by House leaders to provide immediate cash and loan guarantees to the airline industry failed early Saturday morning after rank-and- file members objected to the government stabilizing that one industry, when so many others were also negatively affected by this week's terrorist attacks.

The bill would have provided $2.5 billion in cash assistance and another $12.5 billion in loan guarantees to the airline industry, which experts say is stacked with companies near bankruptcy. Those companies were further hurt this week when all U.S. flights were grounded following the attacks.

Members representing the insurance, financial, and tourism industries turned aside the measure, which was considered under a unanimous consent agreement that allows a single "no" vote to defeat the bill.

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House Democratic Leader Dick Gephardt, D-Missouri, promised to revisit the issue -- which is supported by House Speaker Dennis Hastert, R-Illinois, and other GOP leaders -- when congress returns to session next week. Gephardt said the money is needed because the collapse of the air travel industry could have a devastating ripple affect through the U.S economy.

Even though it was defeated, congressional aides told CNN an important message was sent to cautious Wall Street investors that despite its current instability, the industry will survive the catastrophe.

Continental Airlines announced Saturday it is laying off 12,000 workers and cutting back its flight schedule.

Continental officials said the adverse effects of the terrorist attack were forcing it to cut its schedule by 20 percent.

A day after Tuesday's terror attacks, Midway Airlines -- already in Chapter 11 bankruptcy -- shut down, saying it did not have the assets to ride out the downturn.