Delta Now Enthusiastically Supports Government Subsidies, Industrial Policy

Delta Air Lines has plenty of cash. They never furloughed any employees. Travel is recovering and they’re expecting to return to profitability this summer. They’re even making large bonus payments to management employees.

Against this backdrop, Hunter Keay from Wolfe Research asked Delta CEO Ed Bastian during the airline’s earnings call whether they would turn down ‘PSP3’ the third government airline bailout that will offer them about $3 billion in exchange for continuing to pay employees through September.

Bastian’s reply was succinct: “we don’t anticipate turning that down, no”

For Delta this is basically $3 billion in free money, with restrictions on top executive pay and share buybacks through September and the need to offer the government a small portion of the bailout back in the form of stock warrants.

The largest U.S. airlines, led by Delta, ran a years-long campaign to get the U.S. government to limit flights by Emirates, Etihad, and Qatar. They expressly sought to limit customer choice and raise fares. Their argument was predicated on the idea that those Gulf carriers were supported by their governments, and what they wanted was a free market in air travel without subsidies.

Last month Delta did an about face with Bastian declaring that the strength of the U.S. airline industry is because of “support of Congress.”

During the earnings call Bastian underscoreed that U.S. airlines are doing better than international partners because other countries have failed to provide subsidies to the same extent that the U.S. government has. And he credited the lack of U.S. airline bankruptcies to “to the government support..as a national priority”

Yet an analyst asked later in the call whether the massive subsidies Delta has received in the past year changes the airline’s position of subsidies for international airlines, and the carrier hemmed and hawed and then said it would not, “that’s an interesting question..and certainly we’ve been dependent on the support from our government here to sustain an essential service for our country. I don’t know what that means for the long-term.”

Finally they settled on the argument that Mideast subsidies are fundamentally different because they were meant to ‘grow’ their economies not to ‘sustain’ them. So “I don’t think it changes the character of what our issues were in the past.” Of course government protection for U.S. airlines is just another form of subsidy but it falls on the back of consumers rather than taxpayers.

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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  1. Bastian has all the morals of a coyote (the animal, not the smuggler. A smuggler might actually have morals at times).

  2. Blame the voters who elect the people that hand out our tax dollars to these scummy CEO’s. That’s the real problem.

  3. The airline industry didn’t need anything behind the first found of CARES Act financing even if specific companies did.
    You can’t expect Delta to choose to give back cash that Congress is willing to throw at airlines even as the majority of the American public is also getting it, making it unlikely that enough people will object as hard as it is for some people to want to hear that political reality, as detestable as it may be.

  4. @Tim Dunn

    You’re absolutely correct. However, the merits of a private individual or entity accepting government assistance is a straw man argument.

    Instead, Delta’s argument has always been that the presence of government assistance for only certain parties in a given market creates an uncompetitive environment. Not whether that assistance should be taken when given.

    Many bloggers have long maintained that favorable tax treatment are indeed a form of subsidy, but absent the government literally mailing a check to their Atlanta HQ, Delta claimed otherwise. As a result, their position has always been to cry foul that someone else has cooler parents than it does.

    Until now, the optics were always favorable to Delta, because their balance sheet never indicated “suitcase full of taxpayer money.” This has since changed, and the foundation of their indignant moral-high-ground argument has eroded.

    As Gary would put it, this whole situation suddenly reeks of, “subsidies for me but not for thee.”

  5. Asarious,
    I completely agree with you.
    My point was simply that anyone is going to take what they can get; airlines, for whatever reason, have managed to push themselves to the front of the trough during covid and will be in a whole lot better shape than anyone imagined one year ago.
    Delta is not likely to go after the ME3 for subsidies in the future because they don’t need to; the Euro flags and US3 global carriers will use covid as a reset to their international strategies to allow much less opportunity for the ME3 to grow as aggressively as it once did. The demise of the A380 with its multi-year drawdown helps.
    I’m glad Gary is doing well enough that he apparently doesn’t qualify for covid stimulus relief. But enough Americans are getting it that Congress knows there aren’t enough people to criticize those that get federal cash whether they need it or not.

  6. I think you’re missing a huge and incredibly import point. The CARES act was designed and can only be used to pay employee wages. Period. i.e. keep highly trained and skilled professionals current and competent for the recovery which of course is bound to happen. In turn, massively helping the US economy get back on its feet (return of investment for the government). Plus the added benefit of keeping airline employees out of the unemployment and food stamps line (which would have cost the government $).

    The ME3 subsidies were literally buying teddy bears and caviar to bribe passengers and make their airlines seem superior. They’ve been in the game a long time of stealing passengers from not just the US but from everywhere. The oil money is about drained so they have to buy their way into other industries to survive. Eventually they’ll have to turn a profit and their “superior” product will instantly evaporate.

  7. @Bob – “I think you’re missing a huge and incredibly import point. The CARES act was designed and can only be used to pay employee wages. Period.”

    This is 100% misleading.

    Since airlines weren’t going to lay off everyone, most of the money displaced payroll the airlines would have spent money on anyway. In other words it was free unrestricted cash.

    Moreover, payroll support didn’t just happen through the CARES Act. It was given to airlines – like Delta – that never laid ANYONE OFF. And even after it was clear no one at Delta (or Southwest) was losing their jobs, subsidies continued to flow (round 2 and round 3).

    Additionally, payroll support wasn’t the only form of subsidies airlines received.
    – government-backed CARES Act loans
    – suspension of taxes on domestic tickets throughout 2020
    – subsidies for airports, which kept airlines from paying higher fees
    – federal reserve liquidity that kept borrowing costs low as airlines levered up their balance sheets

    “The ME3 subsidies were literally buying teddy bears”

    Please see United Airlines buying teddy bears, oddly I never got a bear on an Etihad, Emirates or Qatar flight 😉

    https://viewfromthewing.com/united-polaris-bears-will-be-available-inflight-two-days-only/

    Moreover American Airlines lost money flying planes, they profited entirely from selling miles to banks. They even lost tens of millions a year (perhaps hundreds of millions in total) just on their Chicago – China flights (https://viewfromthewing.com/american-airlines-revealed-real-reason-theyre-cancelling-chicago-beijing/) so this idea that US carriers were making pure profit decisions in a free market while Gulf carriers flew money-losing flights is silly.

  8. That is disrespectful and personal. Myself and many friends have received a WARN letter and guaranteed would have been furloughed (laid off) if it were not for the CARES act. Airlines did lay off employees. It is written in law the money cannot be spent on anything besides employee salaries plus there are many restrictions built in that you might not believe but airlines had to think long and hard before accepting.

    Thanks for your concern of fellow hard working Americans

  9. You may be a bot or a source promoted by foreign interests… but either way your news “site” is garbage and promotes nothing but opinions based on lies and propaganda. Americans that live and die and work their asses off are done a huge disservice by you.

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