WASHINGTON (Reuters) - The U.S. Senate failed in a last-minute bid on Tuesday to end a partial shutdown of federal aviation programs that has halted airport construction projects and thrown tens of thousands of people out of work.
Senators scrambled to find common ground with the House of Representatives on a bill to temporarily fund the Federal Aviation Administration but neither side would budge before adjourning until September.
Acrimonious disagreement over proposed cuts to rural air service and underlying discord over a labour issue was reminiscent of the gridlock surrounding a just-completed 11th-hour deal to raise the U.S. government's debt ceiling.
"I am deeply disappointed that bipartisanship has failed us here," said New Hampshire Senator Jean Shaheen, adding a runway project in her state will likely be delayed until the spring.
While the scale of disruption from an FAA shutdown paled in comparison to the global repercussions of a potential U.S. debt default, the aviation fallout was not trivial and may carry political consequences if not resolved soon.
The FAA has issued stop work orders for 241 airport construction projects worth nearly $11 billion, officials said.
"We have the best aviation system in the world," Transportation Secretary Ray LaHood said in a conference call with reporters. "This is no way to run it."
LaHood said FAA air traffic operations were not affected and aircraft safety programs remain in place.
The Obama administration estimates the shutdown has thrown more than 70,000 people out of work since July 22 when the FAA's latest temporary funding authorization expired.
Many are in construction-related jobs, a sector where unemployment tops 15 percent. Starting on Thursday, those workers may begin showing up in a federal report of people claiming unemployment benefits.
WINDFALL FOR AIRLINES
Nearly 4,000 FAA employees have been furloughed and dozens of inspectors who oversee airport safety standards are working without pay, agency officials said.
Some airports are turning to letters of credit, reserves and commercial paper to keep projects going. Smaller airports may have credit problems and less financial flexibility, given their heavy dependence on federal funds, Fitch Ratings said.
Adding to the discontent from the administration and other quarters, airlines have profited handsomely from the shutdown. Political inaction on the temporary spending measure allowed them to drop certain ticket taxes 11 days ago.
Carriers including Delta Air Lines (DAL.N), United Airlines (UAL.N), American Airlines AMR.N and US Airways LCC.N raised fares to match the amount of money passengers no longer had to pay in taxes, bringing in a $250 million windfall.
Some of the money could come back to travellers in tax refunds facilitated by the carriers. But the industry stands to make more than $1 billion if the fare hikes stick and the shutdown lasts until Congress returns in September.
At least one senior lawmaker held out the possibility the matter could be resolved later in the week under congressional procedures that are rarely used.
It would require the unlikely prospect of conservative Republicans in the House backing off their demands to cut spending they consider wasteful. (Additional reporting by Donna Smith, Kim Dixon and Lisa Lambert; Editing by John O'Callaghan)