The troubles and dysfunction of the nation’s airlines should barely register on the radar of a new president dealing with two wars and an economy in steep decline.

But President-elect Barack Obama inherits a crumbling air traffic system, financially ailing carriers falling well behind overseas rivals and an unprecedented number of airline contract talks that threaten to foster widespread labor unrest in the year ahead.

“It doesn’t get any more broke than this,” said Kevin Mitchell, chairman of the Business Travel Coalition, which represents corporate travel purchasers.

These issues are stunningly complex, complicated by the lack of a consistent national aviation policy for more than a decade, analysts say. They will test the new president’s pragmatism as well as his liberal ideals of protecting U.S. workers and promoting a better standard of living for middle-class Americans.

“It is the American dream that we have seen come apart, especially in our industry,” said Capt. John Prater, national president of the Air Line Pilots Association, the largest pilots union.

On the stump, Obama preached of the need to rebuild the nation’s battered transportation infrastructure.

His resolve to do so will be tested barely two months into the new administration, when temporary funding for the Federal Aviation Administration will lapse. The FAA hasn’t been fully funded since 2007, as Congress and the Bush administration battled over how to pay for a new air traffic management system and contracts for air traffic controllers.

Globalization is another pressing issue. Obama opposes allowing overseas investors to have greater control over U.S airlines. But if the U.S. hasn’t loosened foreign ownership rules by November 2010, European nations will be free to unwind recent trade agreements that gave U.S. airlines greater access to their markets.

Obama’s present course could trigger a trade war, warned Brian Havel, director of DePaul University‘s International Aviation Law Institute.

“One would hope the sharper edges of that rhetoric might be softened,” Havel said,0,2647059.story