(Adds comments from Senator Durbin, Senator Collins, JetBlue CEO)
By Richard Cowan and Doug Palmer
WASHINGTON, April 25 U.S. Senate leaders are frantically trying to pull together a plan to alleviate widespread airline flight delays - brought about by last month's automatic federal spending cuts - with legislation that could be voted upon as early as Thursday.
The House of Representatives could vote soon after but leaders in that chamber first want to see what the Senate produces, fearing a retreat on this issue could open the door to easing other budget cuts.
Lawmakers are eager to find a fix before they head out of town for next week's congressional recess. They are concerned about deepening public resentment over the delays caused by the furloughs of air traffic controllers.
Airline passengers have grown increasingly irritated over the past week with delays at major hubs like Chicago, New York, Los Angeles and Atlanta.
Some have reported multi-hour delays in takeoff times and planes being put in holding patterns in the air, with pilots blaming furloughs for landing delays.
The Federal Aviation Administration has said it had no alternative to furloughing controllers this week after Congress failed to come up with a budget deal that would have averted the $85 billion in across-the-board federal spending cuts.
One option senators are exploring is attaching legislation to an unrelated Internet sales tax bill currently being debated, a Senate aide said on Thursday.
A possible approach could be a measure that would give the FAA flexibility to transfer existing funds within the agency's budget - or the Department of Transportation more broadly - so that air traffic controllers' salaries can be fully paid, and those furloughs can be stopped.
According to the Senate aide, the White House is open to Congress dealing promptly with the FAA's funding problem. But the aide said that no decisions had yet been finalized on how to move an FAA measure forward quickly.
The House will await action in the Senate before deciding on how it would handle any legislation to avert further airline delays, according to a Republican leadership aide.
The early Senate plan adds to other stand-alone legislative proposals that have been floated in recent days.
Senate Majority Leader Harry Reid on Wednesday proposed replacing the budget reductions by claiming savings from the decrease of war spending, but congressional Republicans have rejected the proposal, saying counting war savings is an accounting gimmick.
A more likely fix may be one of the bipartisan pieces of stand-alone legislation that would give the DOT flexibility to move around funds to pay air traffic controllers.
"These are simply irresponsible cuts that have real and detrimental impacts on the traveling public on the airline industry, on the hospitality industry and they will cause widespread delays to the air traffic system," Republican Senator Susan Collins of Maine said on the Senate floor. Collins is behind one of the stand-alone legislative proposals.
While Republicans are joining the effort for a quick fix, many have been skeptical about whether the White House and FAA are taking advantage of flexibility they already have.
Republicans have accused the Obama administration of maximizing the disruptions to try to shift budget blame on Republicans - an allegation the administration has denied. Republicans have created a Twitter hashtag, #Obamaflightdelays, for people to complain about the delays.
House Oversight Committee Chairman Darrell Issa, a California Republican, and House Transportation Committee Chairman Bill Shuster, a Pennsylvania Republican, on Thursday sent a letter to Transportation Secretary Ray LaHood asking for internal documents discussing budget flexibilties. The DOT did not immediately respond to a request for comment.
However, a congressional aide involved in the original automatic spending cut legislation that was enacted in August 2011 told Reuters that the administration cannot under the law shift money from outside accounts to fund the air traffic controller account.
The FAA has said it will have to furlough 47,000 employees for up to 11 days through Sept. 30 in order to save $637 million that is required by the "sequestration," automatic spending cuts that started on March 1 for most federal agencies.
Of those 47,000 workers, nearly 13,000 are air traffic controllers.
The FAA issued an update that said more than 863 delays in the system on Wednesday were attributable to staffing reductions resulting from the furloughs.
Another 2,132 delays were attributed to weather and other factors, the FAA said. The agency said it would work with airlines to minimize delays.
Airlines, many of which are reporting earnings this week, have pushed the government to quickly ease the flight delays caused by the furloughs.
JetBlue CEO Dave Barger said on a conference call on Thursday that he is frustrated airlines were told the impact would be limited. "This is government not working - capital letters, exclamation point - when we're sitting here holding the traveling public hostage in the midst of sequestration," Barger said.
Jeff Smisek, chairman and chief executive of United Continental Holdings Inc, said his company's network operations center is working around the clock to minimize the impact of fewer controllers.
"We are disappointed that the FAA chose this path, that maximizes customer disruptions and damage to airlines instead of choosing a less disruptive method to comply with the budget obligations," Smisek said on a conference call.
Thursday's flurry of activity in Washington followed a meeting late on Wednesday with the top Democrat and Republican on the Senate Commerce Committee, LaHood and FAA Administrator Michael Huerta to discuss what steps Congress could take to provide the FAA with the flexibility it needs to cancel the furloughs.
Senate Commerce Committee Chairman Jay Rockefeller, a West Virginia Democrat, and Senator John Thune, a South Dakota Republican, are considering "a few options" that came out of that conversation, but are not ready to discuss details yet, a congressional aide said.
If a fix were to pass the Senate, it is not clear how the House would respond, especially if it is attached to the Internet sales tax bill, which has faced fierce opposition from many online merchants, including eBay Inc and Overstock.com Inc.
Senator Dick Durbin of Illinois, the second-ranking Senate Democrat who is shepherding the Internet sales tax bill through the Senate, told Reuters that "we are working on" ways to deal with an FAA funding fix.
But he added that senators have to consider whether exempting some FAA programs from the tough spending-cut law would be unfair to other agencies and their constituents, who also want to get out from under sequestration.
It also could face a tough time in the House. House Judiciary Committee Chairman Bob Goodlatte has expressed reservations with the Internet sales tax bill and some conservatives have called for hearings. His panel has jurisdiction over the measure.
The House potentially could vote on an FAA budget fix in a different way, however, unrelated to the Internet sales tax bill. (Reporting by Richard Cowan, with additional reporting by Doug Palmer, Thomas Ferraro, David Lawder, Karen Jacobs and Nivedita Bhattacharjee; Writing by Karey Van Hall; Editing by Vicki Allen and Bill Trott)