The head of world airline trade group IATA says so far governments have provided subsidies to carriers totaling $160 billion. But that’s not enough and they believe governments need to hand over more,
For the coming months, the industry’s needs are evaluated at US$70 – 80 billion in additional aid. Otherwise some airlines will not survive.
Unless all airlines get more money, some airlines might fail. Which would be ok, and even healthy for the airline industry.
Propping up zombie airlines just means more carriers competing aggressively for historically low numbers of passengers. It means fare levels where no airline can earn a profit. Subsidizing airlines to keep them all alive means delaying the recovery of the industry.
And airlines do not survive all the time, every single year. The planes they operate still exist, and they’re sold to other airlines or to aircraft leasing companies who place them with established carriers or with new airline startups looking to try another business model. The airports still exist, too, and so do air traffic controllers and pilots. In other words the world doesn’t lose out on aviation because an airline goes out of business.
In the U.S. airlines of significant size usually survive and simply restructure in bankruptcy (employees even retain their seniority!). That means instead of taxpayers being the lenders of first resort, airline investors and creditors take haircuts. That’s exactly the way that it should be, though to be sure there are flaws in the bankruptcy process (retirement funds should be treated as pay and prioritized for repayment, or if not then employees should get a piece of the newly formed company).
- American Airlines has gone through bankruptcy (and predecessor US Airways did twice)
- United Airlines has gone through bankruptcy (and predecessor Continental Airlines did twice)
- Delta Air Lines has gone through bankruptcy (and predecessor Northwest has done so as well)
In fact it’s the twice-bankruptcy US Airways and Continental Airlines that took over only once-bankruptcy American and United.
The best support for airlines is bringing the virus under control. When you count up airline subsidize, it’s worth including all of the money spent on vaccines, and by the way airlines are going to get a good chunk of vaccine cargo business as well. Instead of spending money propping up airlines and paying employees not to work, taking the money and accelerating production and distribution by even a few days will pay better dividends for this industry and society as a whole.