Last week I wrote about former Spirit Airlines CEO making the only honest case for government bailouts of the airline industry. It’s a flawed case but he didn’t pretend that the money from the government just helps employees. He made the case why helping airlines is good.

In today’s episode of the Airlines Confidential podcast, Baldanza and co-host journalist Seth Kaplan address points that I made, and also comments from Skift‘s Brian Sumers (at 23m46s).

I argued that airlines have been able to access capital markets without government; that payroll bailouts cost an insane $333,333 per job that might be lost just for six months because most of the money is covering payroll airlines will still incur anyway (the government pays most of payroll, but airlines aren’t laying off most employees); and keeping too many airlines flying too many planes is bad for the industry as a whole – and bad for the economy when you’re delaying layoffs that happen anyway until ‘later’.

Baldanza offers three main responses.

1. The cost of airline payroll bailouts is lower than it seems, because without payroll support people go on unemployment. That’s true to some degree, and I never disagreed with it – though a portion of people furloughed will work at other jobs rather than staying on unemployment for as long as government payroll support would have lasted, and unemployment (even with federal enhancements) is generally less than airline union salaries.

   Remember that Southwest Airlines isn’t furloughing anyone this year, how can you say payroll support money to Southwest is going exclusively to employees who would have been laid off?

2. Under payroll support, employees get less than if airlines were flying a lot which is true, airlines have been having folks work minimum hours while receiving payroll support – but that underscores my point about how payroll support gets diverted from just covering the cost of employees who would be furloughed, so that there’s plenty of money left to cover employees who wouldn’t be furloughed. CARES Act payroll support was based on 2019 payroll, but airlines have used a number of tactics to pay employees less – fewer hours, forced unpaid vacations, and buyouts and voluntary leaves have reduced current payroll already.

   Seth Kaplan on the show makes the point that there’s not going to be employee profit sharing in a year with no profits, and CARES Act payroll support doesn’t cover that. That’s correct. Employees at American, for instance, got an extra 1.4% of pay from 2019 profit sharing, employees at Delta did better of course.

3. Airlines are still losing money Baldanza offers “airline equities are trash, investors in the industry have lost billions of dollars” so it’s silly to say airline investors benefit from bailouts. As I observed in my earlier piece though this conflates average effects and marginal effects. Without bailouts airline investors would be worse off – indeed, an airline like American might be quicker into bankruptcy, wiping out investors and leading creditors to take a haircut.

   Baldanza concludes, “to say that somehow this money that would be paying for employees is actually helping investors because it’s keeping the stock price up, the data just do not support this statement at all.” But it’s sophistry to claim that because airlines are losing money, and stocks are much lower than they were before the pandemic, that investors haven’t benefited from government bailouts – when the money hasn’t just been a pass-through to employees the airlines would have furloughed anyway.

In Baldanza’s Forbes piece he laid out reasons he thought bailing out the airlines were a good idea. He argued that robust airlines are important for economic recovery.

What he failed to address was that we have – and will have – the level of flying that’s supported by consumer demand, and that it’s consumer demand that will bring back the economy and air travel.

• Flight attendants just don’t take that long to replace, and even in the robust economy pre-pandemic American Airlines described their selectivity for the job as being ‘statistically tougher than getting into Harvard.’

• Pilots take longer to train and take more work to keep current which is why airlines are keeping on more pilots than they need to be, precisely to be prepared to grow flying when consumers are ready to travel.

Baldanza’s economic point is that somehow airlines wouldn’t invest enough in their own future recovery, and so the government had to make them do it. However that’s not what’s occurring with furloughs.

In his response to what I wrote, though, he collapses back to the argument that the money is largely going to benefit employees and not airlines (or airline investors) – and that’s not where his original argument was strongest.

Still, I am flattered that he took the time to engage my arguments – as I hope he’s appreciative of my attempt to take his arguments seriously as well, and it’s in that spirit that I offer the continuation of our infinite regress: He talked about my arguments talking about his arguments, and here I talk about his arguments responding to his talking about my arguments talking about his arguments.

While I’m deeply humbled that he says he’s a reader of this blog, I suspect we’ve laid out our differences and I certainly wouldn’t anticipate another round on next week’s Airlines Confidential. By the way it’s a great weekly listen if you don’t already tune in.