Airlines are facing an existential crisis in their business, as bookings dry up and customers stay home. Other businesses, often smaller businesses, are facing a crisis too. People aren’t going out to local restaurants. Other businesses are closing down, and not all of their employees are being paid.
But airlines are politically well-connected. Delta’s CEO Ed Bastian told his airline’s employees today that they are going to the government for help, and they expect to be successful. While United Airlines is facing business challenges, its CEO Oscar Munoz spent two days in Washington “meeting with senior officials in the Trump Administration and senior members of the U.S. House and Senate” looking for help. American wants a piece of the action, too.
The option is being discussed for the 7.5% tax on airline tickets, which provides a substantial part of the $16 billion a year collected for a trust fund used to help pay for the U.S. aviation system, according to three people familiar with the issue who asked not to be named.
Another possibility would be to allow airlines to temporarily keep a fee as high as $4.50 per passenger that goes to airports for construction and maintenance, the people said.
If airlines keep tax money instead of giving it to the government, the government will still find itself needing to fund services. And taking airport fees leaves airports in a lurch, who themselves are hurting with fewer passengers and fewer flights eating into their revenue.
- At this point giving government money to airlines is just subsidizing an airline’s stockholders. No major U.S. carrier is on the brink of bankruptcy, and if they do go into chapter 11 that means investors take the haircut.
- There’s no serious systemic risk to the economy from an airline bankruptcy. Each of the major airlines has flown through bankruptcy successfully before (some have even twice).
- No single ariline is crucial to the nation’s economy as a whole, though if it were it would keep operating, and if that came into question government could consider options at that time.
These businesses are unquestionably better off with government cash than without it. Management is better off and their shareholders are better off. But we shouldn’t ask the median taxpayer – who themselves are going to be facing serious hardships as people stop eating out, having dry cleaning done, fixing cars when they’re driving less and who may themselves face layoffs from closed businesses – to give up money to the airlines.
Airlines have spent billions buying back stock. For years I’ve said that’s underscored how bad an investment airlines are, that they don’t have better uses for the money to generate outsized returns than just giving the money back. But private enterprise is profit and loss and when businesses don’t suffer losses they’re free to loot their companies risk-free. You wouldn’t buy the cramped seats and surly service we were selling, but we took your money anyway.
As the Washington Post reported a month after 9/11, Congressman Jim Moran said seeking transportation spending in another time of crisis “It’s an open grab bag, so let’s grab.”