House Republican Whip Tells American Airlines: We’re Open To More Subsidies

American Airlines CEO Doug Parker was in DC on Wednesday talking to politicians about a second bailout, and airline President Robert Isom reports he has spent time on the phone with legislators as well. Isom spoke on Wednesday with House Minority Whip Steve Scalise, and read out his call to employees in an internal conversation, a recording of which was reviewed by View From The Wing.

Two hours prior to the employee meeting, Scalise relayed to Isom “We’ve got open ears [for a second round of airline subsidies], a lot of hard decisions to make, but I gotta tell ya I realize the airline business is essential – not just from a cargo perspective but ultimately from a commerce perspective in making sure we’re ready when the country needs us.”

In Isom’s telling, Scalise reported that “he had flown earlier this week back to Washington DC.” Isom says Scalise asked him to “pass one message on [to employees] that ‘we need ya, we need American Airlines, we need the airline industry out there, and please keep doing what you’re doing.’ Scalise boarded his flight, pulled the tray table down, and “having it smell like disinfectant was one of the best things that could have happened, he appreciates the multi-layered approach to keeping people safe.”

Scalise concluded “the country cares about the airline industry, the country cares about American Airlines, and wants to make sure we have the wherewithal to make it through the storm we face right now.”

In the same talk Isom explained to employees that there was less consumer demand for flights, so there will be fewer flights and that’s why they’ll have fewer staff without government support. So the second round of bailouts they’re pushing for, and that Republic Minority Whip Scalise has “open ears” to, will be paying people not to work – and funding highly paid executives and pilots in some cases making over $300,000 a year – when the economy needs people to transition to new companies and industries meeting consumer demand in order to recover.

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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Comments

  1. AA management is pushing for CARES 2 now because they realize they are in trouble (more so than other carriers); since early summer, they have been thinking they could keep aggressively expanding their schedule and taking market share away from the others, but this only worked for about two months. Not only did the other carriers (primarily DL and UA) ‘wise up’ and add back capacity for July and August to not be outdone by AA, the surge in cases in the last month has essentially halted any demand growth and that strategy is no longer going to work for the fall.

    Most carriers have been quite ambivalent about getting CARES 2 passed, instead just letting the unions push ahead. However, given the rather dire demand outlook for the fall, carriers like AA which have a huge debt to service, and not enough takers of the voluntary packages, have no choice now but to look to the government for a second handout. Notice that carriers like Delta and Southwest, both of which have large numbers of employees sign up for early out and leaves, have not been vocal about wanting CARES 2.

  2. With corporate subsidies, ie taxpayer handouts, one would only hope for some reward to the taxpayer: fewer seats with more room (or keep that middle seat vacant), more attentive service from employees, greater booking flexibility with lower fees.

    Yeah, sure.

  3. Telling Doug Parker and his cronies that is like telling a crack addict I have free unlimited crack to supply you with a free luxury home and a guaranteed salary with a large golden parachute

  4. Airlines used tax loopholes (operating loss carry forwards) to avoid paying taxes when they were raking in record profits. At the same time, some even managed to get taxpayers to pay them. For example, it was reported that in 2018, Delta had income of $5 billion, paid no tax, and even managed to get a tax rebate of 1$87 million.

    Now they want more free taxpayer money and won’t be paying taxes to help pay off the debt we are incurring to help them. That sounds fair! “Drain the swamp.” Right.

    One thing that would help airlines, taxpayers, and the economy would be using our money to give us vouchers for travel. The big problem with travel, of course, is the virus remains out of control. There’s just no getting away from the fact that everything about our current situation always comes back to one thing: the need for mustering the national will to bite the bullet and control the virus rather than hoping it goes away on its own or people just forget about it.

  5. Damn I wish lawmakers were this generous and assumed this much good faith when it comes to helping the average working person!

  6. They want more money from the Americans then they should give something back. Maybe free baggage, ticket changes or seat selection fees.It’s no surprise folks don’t like the Airlines.

  7. It’s government restrictions that are hurting businesses. Their lockdown measures, such as a mandatory quarantine, are dissuading travelers and wreaking havoc on the industry. You mention pilots and managers, but fail to mention that there’s ten times as many employees whose jobs are at stake, and rely on a biweekly paycheck. If they were to be laid off, the devastation would be felt not only within the industry, but throughout the entire economy. Furthermore, there’s a tremendous cost associated with furloughing an employee, as numerous training cycles would inevitably follow. It doesn’t make sense to furlough an employee when the situation could change virtually in an instant, with a vaccine or another type of breakthrough. The airlines have provided a safer, more reliable product than any previous time in history. They’re going through a difficult time right now, and need our support. Hopefully by the expiration of this extension, the entire economy will be on a path toward recovery.

  8. @JimmyTheGent – lol, “They’re going through a difficult time now, and need our support.” When have the airlines ever shown that toward their customers. Perhaps if airlines weren’t so fee happy or treated customers with respect, they’d get a little more sympathy. lol

  9. @JimmyTheGent are you delusional? Yes there were roughly a 50% closure in the US and at this point we are realistically 65% open.

    Government closures as they were were simply following business. Most of the weekly fliers I know, their companies started killing international travel in February. Weeks before any “government shut down”

    Corporations also at this point in the argument are still prohibiting their staff, from any international travel and SEVERELY restricting their travel within the US again thats not the Government is a Fortune 50 corp.

    Airlines will regain life via a BK like they have so many times before – there isn’t a SINGLE reason I can think of that makes sense to give another round of funding to the airlines – absent the US owning the airlines.

    Just look at the valuations the debt to income ratios – they should be liquidated and restarted.

    As much as I often disagree with Gary’s take on things – he is right in this circumstance. The FA’s / Gate agents and are mostly safety trained fast food workers. Especially the US Airlines. As soon as they can be retrained for something else the better.

    We have spent so far 85 Billion on Airlines during the Covid issue – there are roughly 750,000 WORLD WIDE in the airline industry that is $113,333.00 per. I mean I make that sort of $ each year as does my spouse, but I would wager the average FA pay is closer to 40k

    IATA – has said 2021, the 2022 and now as of this week 2024 to get to recovery… likely generous thinking.

    Simply another round of airline bailouts is pissing into the wind.

  10. Let the industry collapse. Start over with Breeze. Most airline workers can be shifted over to amazon, walmart or instacart. I have had couple of airline workers driving for lyft. Some pilots can go back to the military or fly private jets. This is a new world and these people will have live on less money and live more simply.

  11. dwondermeant: You mentioned “crack addict.” Do you happen to have contact info? Asking for a friend.

  12. @Geoff — what caused passenger demand to decline from June to July? If you believe it’s a lack of willingness than you’re delusional.

    Look at the northeast quarantine measures for NY, NJ, and CT as an example. It’s hardly a free market decision when you’re being threatened with a two-week quarantine if you arrive in said location. Futhermore, international travel is completely banned because of government restrictions, regardless of whether a corporation chooses to exercise the option or not.

    Operational costs far exceed labor, so you’re not going to quantify the value of an employee simply by dividing total expenditures. An out-of-work employee carries with it another burden — so you’re paying either way. The PSP element of the CARES Act is simply a caveat for employee protection. Again, if a vaccine, or another breakthrough happens, the demand could change in an instant — and the airlines have to be ready for that.

    Aviation is heavily regulated, so in some ways it already operates like a government entity. However, to benefit the American people, it is separate, and relies on competition to provide a better product. Imagine what Dan (the respondent above your post) would say about the quality, if there was a single unit operating at the government’s discretion.

    It would almost be laughable if it wasn’t despairing, how many people take this industry for granted. There’s not one post complaining about safety because that would be impossible. That’s an unspoken characteristic of the modern airline industry, that’s nothing short of a miracle, yet taken for granted by so many. What about the convenience of being able to travel to all corners of the world; fast; and at a time of your choosing? It’s not something most people think about, until the moment they conduct a websearch and expect various options to be there.

    Regardless of your proximity to this industry, it affects everyone. If the airlines become impaired, the ramifications are felt throughout countless other industries: energy, hospitality, etc. The length of the recovery will depend on the government’s willingness to impede air travel. Until it becomes a customer’s choice, it shall remain the government’s burden.

  13. When I heard airlines might get another bailout, I thought ‘here we go again.’ I realize that airlines are a necessity and they are hurting. But, what does someone like American do for their customers besides squeeze in more seats and charge for baggage? If they do get some type of bailout, I wish there were restrictions on it – like making things better for the customer when air travel does come back with fewer seats, free seats and free baggage.

  14. @JimmyTheGent – The delusional remark was elated specifically to the assertion that there was a forced government shut down of the airlines.

    Yes the NE has a “quarantine” in place – but realistically is it enforced? Its upon the “quarantined” to adhere – unlike say Australia where you are transported and monitored.

    While I grant that the air transport industry is an important one.

    The airlines have through stock buy backs and spreadsheet “magic” burned through the earnings they have made since the end of the last Republican recession.

    My opinion is unchanged – let them fail – go through bankruptcy and try again.

    I think it was an enormous waste of money. To that end I am in constant contact with my Congress Critters to have them vote against any further bailout of the Airlines

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