Largesse For A Defunct Airline

By SALLY B. DONNELLY

News quiz: Name the one airline in America that actually made money in the aftermath of the terrorist attacks on Sept. 11. Final answer: Midway Airlines. The carrier, based in North Carolina (which has the same name as a Chicago-based airline that went bust in 1991), declared bankruptcy in mid-August, unable to compete against low-fare king Southwest Airlines and hurt by an unfriendly split from its partner, American Airlines. The small carrier had grounded its flights and was close to shutting down operations when the attacks occurred. Within hours, Midway closed its doors.

But that did not stop the airline's well-connected executives from asking the Department of Transportation for a chunk of the $15 billion airline-bailout package passed by Congress. The DOT, with encouragement from North Carolina politicians, graciously complied and cut a check for a cool, taxpayer-funded $10.8 million on Nov. 30. Industry analysts were surprised by the Midway bailout. "This sets a new and dysfunctional precedent in airline economics," says Richard Aboulafia of the Teal Group. Aviation Daily editor Michael Miller called the move "a great public-works project for the state of North Carolina." Midway Airlines CEO Robert Ferguson would not return phone calls from TIME, but other reports have said the airline may try to start flying again this month.

--By Sally B. Donnelly