A bill to reimburse the airline industry for homeland security costs, and for other purposes.

Amends the Federal transportation code to change from discretionary to mandatory the authority of the Secretary of Transportation (Secretary) to provide insurance and reinsurance against loss or damage arising out of any risk from the operation of an American aircraft or foreign-flag aircraft. Requires the Secretary to extend through December 31, 2007, the termination date of certain insurance policies the Department of Transportation issued to air carriers as of a certain date on no less favorable terms to the air carrier than existed on June 19, 2002.

Repeals the December 31, 2003, termination of, thus extending indefinitely, the incident coverage period (beginning on or after September 22, 2001) for which the Secretary may certify that an air carrier was a victim of an act of terrorism for purposes of limited air carrier liability for third party claims arising out of such acts.

Repeals the December 31, 2004, termination date for the authority of the Secretary to provide aviation insurance and reinsurance.

Directs the Secretary of Homeland Security to reimburse air carriers for all screening and related activities that they perform or are responsible for performing, including: (1) the screening of catering supplies; (2) checking of documents at security checkpoints; (3) screening of passengers; and (4) screening of persons with access to aircraft.

Requires the Secretary of Homeland Security to reimburse air carriers also for: (1) the provision of space and facilities used to perform screening functions and other space used by the Transportation Security Administration; and (2) the cost of fortifying cockpit doors after that date in accordance with specified law.

Requires the Secretary of Homeland Security to reimburse State and local law enforcement and airport police for complying with any directives to provide security for air carriers or at airports.

Revises the authority of the Under Secretary of Transportation for Security to require air carriers to provide flight seating for on-duty and off-duty Federal air marshals. Repeals the authority to require the carriers to provide such seating at no cost to the marshall or the U.S. Government. Requires the Under Secretary to provide for payment at the lowest possible airfare available for the flight at the time of booking.

Declares that no security service fee shall apply from one year following the enactment of this Act. Requires the Secretary of Homeland Security to reimburse the costs of providing civil aviation security services.