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.