The financing authority was included in a House-Senate compromise proposal on long-term aviation legislation finalized on Tuesday.

Four years in the works, the bill would fully fund the Federal Aviation Administration at nearly $16 billion annually through 2016.

It also lays out other aviation policy priorities, including about $3 billion per year for air traffic modernization, which is moving slowly.

Airlines were unhappy with being left out of the 2009 economic stimulus, and have since pressed the Obama administration and Congress for assistance with the costs of making their aircraft compatible with satellite-based navigation systems.

Carriers have argued that costs of overhauling the air traffic network are extensive, and would eat into their bottom line just as their finances are rebounding from down years related to recession.

They also complain vigorously that they are overtaxed and contribute more than their fair share through passenger fees, fuel taxes and other levies to air traffic, airport and security programs.

A few carriers, including cargo companies, have already invested billions in new aircraft fully equipped with the latest technology or off-the-shelf retrofits, like cockpit navigation displays.

Congressional and other sources familiar with the discussions said the loan guarantee provision would permit the Transportation Department to offer low-interest credit support to carriers for specific upgrades intended to help reduce airport delays and open up more efficient routing.

The Obama administration has weighed options for helping airlines, so its support is expected. It is uncertain whether carriers would take advantage of the loan guarantee program.

The current air traffic system relies on radar and is considered too old to efficiently handle thousands of commercial flights daily, particularly those using busy airports in the East.

Equipping new and existing Boeing (BA.N) and Airbus (EAD.PA) planes with related technology is expected to cost several billion dollars over many years.

Final House and Senate votes on the FAA bill are expected in coming weeks. The White House supports the bill, which also continues subsides for airline service to rural communities and modifies federal rules governing airline union elections.

(Reporting By John Crawley; Editing by Bob Burgdorfer)

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