Airlines Pick Your Pockets Again With Third Bailout Of The Pandemic

Congress passed the American Rescue Plan which includes $14 billion for commercial airlines, and requires them not to furlough workers through September 30.

  • Previous bailouts included $50 billion in the CARES Act ($25 billion in payroll support and $25 billion in subsidized loans) plus suspension of the domestic air travel excise tax for 2020 and then an additional $15 billion in December 2020.

  • This brings total commercial airline subsidies to $79 billion, separate from funds for airports, airline contractors, and cargo carriers.

Under the terms of ‘PSP2’ payroll support, airlines could not furlough workers until April 1. This requires airlines to keep workers on payroll for an additional 6 months. They are free to furlough workers starting October 1 if air travel doesn’t recover to require the services of everyone left at the airlines (and if there is no fourth bailout).

Most of the money goes straight to the airlines, rather than to cover the costs of workers who would be furloughed. It covers payroll expenses they are incurring anyway, with or without subsidies.

  • Under current payroll support, for instance, American Airlines received $3 billion towards four months of payroll, but reported that paying the full cost of previously furloughed workers cost just $100 million per month.

    That means they pocketed $2.5 billion from PSP2 and can be expected to capture almost as much from round three. Actually, even more, because not nearly as many workers were queued for April furlough as airlines furloughed in the fall. Numbers are roughly similar for United Airlines.

  • Meanwhile, neither Southwest nor Delta has furloughed anyway. Southwest expressly committed after the last round of subsidies not to furlough in 2021 already yet we’re giving them billions more not to furlough anyone through December.

  • Delta is even paying out large management bonuses while taking payroll subsidies.

J.P. Morgan told investors in the fall to expect the second round of subsidies and that a third round was possible, and to use that in valuing airline stonks.

American even figured out how to keep workers they let go from collecting on payroll support. Of course both current and former airline employees who are eligible will also receive $1400 direct payments.

The airline strategy of letting unions speak for them with a Democratic Congress was brilliant. They managed to hoodwink union leadership into pushing for these bailouts while spending only a small fraction on workers.

You probably haven’t been buying their tickets during the pandemic, but airlines have been taking your money anyway. Remember when the three largest airlines lobbied aggressively that government subsidies were intolerable? That was only 18 months ago.

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. And for all this bailing out of the US airlines, what have American taxpayers gotten out of it? A massive wasting of money that could have been used to provide better unemployment benefits for all covered Americans …. including the airline employees.

  2. Jamesv2147,

    I suspect that the Democrats wouldn’t have been able to make it fly in the US Senate even if they could get it to fly
    by the Senate parliamentarian. There are more DINOs than RINOs in Congress.

  3. Could they at least get some warrants for the taxpayer? Union, executive, debt holder and equity holder bailout all rolled into one.

    Agreed with John, a 4th, 5th and 6th bailout are totally plausible

  4. Gary,
    Yes, the situation was a big more urgent then. Now, its just lightning money on fire. I don’t think he would be playing along. Just wait, it’s nowhere near over. Bailout # 4,5,6,7,8,9 and 10 are on the drawing board and with little chance of a meaningful challenge, its happening. Expect things like $50,000 year minimum welfare, $20/hr, everything short of murder to be legalized (unless you voted for Trump), school?….lol…..there will never be public inperson education again. Border?….no. No Border and no more farting cows.

  5. The CARES Act loans weren’t subsidized. At LIBOR plus +2.5-3.5% they were well below the governments cost of borrowing. They were below what the airlines would have paid in the private market but provided a positive carry for the government. That’s not to defend the outright gifts to the industry but a statement of fact.

  6. @Jerry – a loan below market price is a subsidized loan, and to offer that taxpayers are bearing repayment risk.

    @Jay Brown – As it happens I actually don’t use any products from the Cupertino Fruit Company.

  7. It’s another example of why Dems and unions destroy anything they touch. It’s like nearly every government welfare program supported by Dems that encourages poverty, makes the problem worse, and allows these politicians to grift. Airlines need to reach an equilibrium in the marketplace. The country has changed. It doesn’t help workers to be strung along when they could collect unemployment and look to other opportunities. I guess it is better that U.S. airlines get something rather than more money to Sudan/Pakistan/$45 million to the Kennedy Center. When 1.9 trillion is thrown around, 15 or 25 billion is just a rounding thing.

    ++

    Republicans unfortunately are just as bad as Dems. They mean well (unlike half of the Dems). They just are not logically consistent. They say they support freedom from government, but they support cops enforcing leftist laws they don’t support. Laws they do support like drug laws and seat belt laws go against the very definition of what it means to be conservative (we own our bodies and govt. should not be telling us what we can and can not do to them). It’s reflected in wanting to ban abortion. 100% of those getting abortions (outside of birth defects) are leftists (who oppose free speech/gun rights/economic freedom/religious freedom). A smart Republican/conservative would cheer at these people removing themselves from the gene pool. If abortion is evil (it is), it’s a good thing only evil people get abortions. A win win. We should rejoice.

    ++

    Republicans/Conservatives would be wise to support monthly direct payments of $1200 (UBI) for all citizens 18 and over. Leftists are able to breed poverty, disincentivize working, and create welfare babies through their welfare programs that disproportionately benefit drug addicts/alcoholics/specific groups. The White working class get nothing. Eliminating all federal welfare programs (food stamps/section 8/ssi/etc) and removing the need for most local & state welfare programs (homeless shelters and aid) with direct payments would destroy the bureaucracy the leftist Dems and uniparty rinos hide behind. Politicians would actually have to stop sending money to Israel/Pakistan/Saudi Arabia/Sudan/etc. and stop wasting tax payer dollars on excessive military spending.

    90% of all people making over $2 million a year are leftists who oppose personal freedom (free speech/gun rights/religious freedom) and support anti white policies. Conservatives would be smart to protect small businesses and corporations which provide jobs and great 401/ira wealth to many working families; they can do that by supporting 0 federal tax on anyone making under 300K a year and raising taxes on everyone making over $2 million a year($4 million married). Taxation is morally wrong as it is theft. Until our people can have their own independent and free country (20 states seceding), it is wise to support a tax policy that helps our own people the most (white working class who respect freedom to practice traditional values and support personal freedom) and hurt the leftist elite the most. 10% of people making over $2/$4 million a year is not worth the fight. Same thing with minimum wage. Conservatives should be hiring their own family and their own people. Money says within our own. $2 more an hour that stays in house (so to speak) won’t hurt us. It would hurt leftist small businesses who run slave labor. Just on that point alone we should support a higher minimum wage until we can have our own country where hard work and fairness mean something. Millions of people are kicking it up on welfare at our expense. We all might as well receive checks from the government instead of just a few.

  8. A loan below the average open market price for a more common loan of a comparable duration is not necessarily a subsidized loan.

  9. And in Australia, albeit on a smaller scale : Today, announcement that the government will spend 1.2 billion ( USD 1 billion) on subsidies for airline tickets for selected domestic routes; part of it is an encouragement for Australians to vacation at home (…not much choice , as the borders are closed)
    It goes without saying : 1. Enthusiastically welcomed by the grifters running the airlines 2. Shameless pork-barreling in the sense the “selected routes” are almost all in electorates held by the government by relatively narrow margins.

  10. @John Waterson – enjoy changing your name every time you post your nonsense? You don’t seem to actually travel – why not take it to Parler? You’ll be happier there.

  11. This is what happens when major media outlets fail the inform the public. All the news orgs reported only about the minimum wage, checks to individuals and unemployment benefits and barely mentioning actual covid related spending on schools, PPE, and vaccinations. There also massive tax incentives – for both individuals and businesses – that never got reported.

    I’m starting to come around to the GOP point of view that this was a far over reach.

  12. @Chriss, the situation s less urgent for airlines now. That’s why they are getting $14 billion form Biden versus $65 billion from Trump.

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