5 Reasons The Airlines Won’t Get The Second Bailout They’re Asking For

Airlines want another bailout. They’ve been laying the groundwork for two months. The major unions are asking for full payroll through March. The American Airlines pilots union, at least, is trying to frame the subsidies as pro-consumer calling it the government ‘buying all the middle seats’ although in many ways that’s an even worse idea.

There’s no real appetite for another airline bailout, but there are two things the airlines have going for them:

  1. Current job losses are slated for October 1, just a month before the Presidential election – that creates a chance for the President to back more bailouts.

  2. These are mostly union jobs, and unions are at the forefront making the request – that creates a chance Democratic leadership in the House might back more bailouts.

It’s a terrible idea. The President may reportedly not be meeting with his Council of Economic Advisors Chair much, but the hardline taken by the Department of Treasury requiring a portion of CARES Act payroll support to be taken as loans, and taking warrants in return, and demanding real collateral for other funds suggests they won’t roll over either.

There are (5) fundamental reasons

  1. Too greedy. Airlines have already pushed out employees, there are fewer people on payroll working less hours. There’s no reason to give them as much for payroll as before. Furthermore airlines aren’t literally going to lay everyone off without a bailout. Doug Parker says American needs to lay off 10% – 30% of employees, depending on work group. They don’t want to let go of very many pilots because of the cost of re-training, and that many will be needed again next summer. If we wanted to require airlines to keep all their employees, we’d only need to subsidize perhaps a quarter of payroll.

  2. Bad for the economy. We know that airlines are going to be smaller, and need fewer employees. Delaying when employees move on to other jobs delays getting the economy productive again. Delaying economic adjustment by promoting heavily-indebted zombie firms is what gave Japan a ‘lost decade’.

  3. Keeping all airlines alive delays industry recovery. Too much industry capacity means everyone is unprofitable, or at least less profitable. That means airlines underperform and have a harder time paying down debt they’ve borrowed to stay in business.

  4. Subsidizes airline investors at the expense of taxpayers There’s nothing fundamentally bad for the economy about an airline declaring Chapter 11, shoveling more money at airlines just props up equity and bond investors. The government was willing to do that once, in the rush and fog of initial bailouts. Now that Congress is slowing down the appropriations process (relatively speaking) there’s less of an opportunity for hands in the cookie jar.

  5. No money left. Too many priorities, and some limit to the size of bailouts. States are seeing their tax revenue decimated, which may lead to real declines in state government employment (since states have real limitations on their ability to borrow). That hits schools, which have their own vocal interests, and will probably be considered a higher priority than pilots and flight attendants.

doug parker testifying before congress
Doug Parker testifying on the need for subsidies to the US airline industry in 2001

Airlines have had little difficulty accessing credit markets throughout the pandemic. The federal government shouldn’t be the provider of funds as a first resort, and they certainly haven’t been a last resort. The major airlines say their business is already out of the woods, yet we should give them another $32 billion? I just don’t see this happening.

About Gary Leff

Gary Leff is one of the foremost experts in the field of miles, points, and frequent business travel - a topic he has covered since 2002. Co-founder of frequent flyer community InsideFlyer.com, emcee of the Freddie Awards, and named one of the "World's Top Travel Experts" by Conde' Nast Traveler (2010-Present) Gary has been a guest on most major news media, profiled in several top print publications, and published broadly on the topic of consumer loyalty. More About Gary »

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Comments

  1. #2 is true. I’m waiting to get laid off so I can just move on. I can’t leave in my own accord since I’ll lose my spot on the seniority list .

  2. Because the first round was a s**t show (not just the airline portion) where the government got to choose which companies (I.e. friends of the idiots) to grease at taxpayer’s expense. We still don’t even get to see the full list of recipients!

    Just call a spade a spade, and let capitalism do its job.

  3. I’ve just Googled “Bundles of US dollars” and guess what, there are dozens of images of bundles of US dollar bills.

    Why are you fixated on using Bank of England £20 notes?

    Use an accurate picture, you’ll make your blog more professional.

  4. I was against the US airline bailout package given earlier this year, and I’m even more against providing them yet another bailout at this time. I would rather see the money used to provide better unemployment insurance terms for displaced workers regardless of industrial sector.

  5. @Chase

    I agree completely. If they fail so be it.

    IMO: They shouldn’t get more bailouts when people are being evicted.,,it is better to bailout people directly.

  6. Rather than bailing out any industry ,better unemployment and career training should be made available to the airline workers who will need to go on another career path. The armed forces have a pilot shortage they should consider hiring younger commercial pilors.

  7. How can we give endless financial aid to the Airlines. They are 100% transporting people with the virus to all 50 states. In reality this was the reason the virus had spread so quicky. How is is it that Hawaii has so few cases? Duh! They stopped all flights into the state. Good job!!!!
    If anyone doubts this fact, check the numbers of infections.
    Need I Say more

  8. Why don’t you be quiet and stop staring up s@&t the airline might get a bailout why are you so worried about this it not your concern what you mad stop spreading this negativity GARY !!!!!!! Your such a hater people need their jobs I don’t know what you’re talking bout we trying to keep hope alive and you’re trying to tear it down how much are they paying you to put these articles up …smfh

  9. Bailout the airlines . Theres still a chance travel industry could pick up substantially in 6 months , pent up demand .

  10. The airlines do not need a bailout and should be left to sink or swim on their own accord. This corporate welfare paid for by the taxpayers has got to stop at some point.

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