American Airlines CEO Doug Parker appeared on Face the Nation today. The first question he was asked was, essentially, with all the subsidies you’ve been given why do you need to furlough anybody? [Sure, CARES Act payroll funding that precludes layoffs expires September 30th but American Airlines just took a new $5.5 billion subsidized loan from the government on Friday].
Parker says why yes! But his real plan is more government money.
He calls payroll support ‘a passthrough’ but that’s blatantly untrue. The original round of payroll support covered 75% of American’s 2019 payroll. They weren’t going to lay off 75% of staff, which means the rest of the money went to support spending they were going to do anyway (a subsidy).
American and Delta are the only large U.S. airlines furloughing workers the first week of October. Southwest pledged not to furlough anyone this year. Yet somehow all U.S. airlines are supposed to be given billions more to preclude layoffs that they won’t necessarily be doing anyway.
In total about 50,000 commercial airlines employees may be furloughed. Another $25 billion to preclude furloughs for 6 months is $500,000 per worker. That’s an annual run rate of $1 million per job.
Parker is clearly on national television because most of the money amounts to a straight subsidy – another straight subsidy.
He’s asked “how much money, and for how long?” Airlines aren’t going to recover by March 31, when another round of payroll support would run out and they could again furlough these same workers. American itself says travel won’t return fully by then. United says not until the end of 2021 at least. IATA says 2024. So this is just kicking the can down the road.
Yet Parker says people are starting to travel, quarantines will go away, people will go back to work, he hedged and didn’t answer the question.
If Parker would have said we only want payroll support for the people who we’ve announced will be laid off that would be a bad idea for the economy (paying people not to work, versus finding new places to be productive) but I’d respect it. Instead he pretends the next $25 billion in CARES Act payroll support he’s barnstorming for is about the workers and not about himself.
Parker by the way survived as CEO of America West, to acquire US Airways, because he successfully secured federal Air Transportation Stabilization Board funding after 9/11. US Airways received those subsidies, too. He clearly believes the path to profitability for his business runs through Washington.
He’s sold over $100 million in American Airlines stock while the company was buying back stock and loading up on debt before the crisis. During the pandemic he hasn’t even reduced his annual stock grant (he receives all of his compensation in stock).