The airline industry has long had effective lobbyists, and its lobbying is in furtherance of its own interests not the public interest. Just as the campaign ‘against subsidies’ by Delta, United, and American was about transferring money from consumers to their shareholders, now the campaign ‘for subsidies’ is about transferring money from taxpayers to their shareholders.
The best case for government aid to the airlines isn’t that the industry will be facing massive losses. That’s a huge problem for airline management and shareholders, not for the government and taxpayers. At this point the only moral case for government assistance is that government policy that has largely shut down transatlantic air travel amounts to a ‘regulatory taking’ of a big portion of their business. Of course the value of that business is heavily depressed – money losing, even – because of a drop in consumer demand, not bans on travel by non-residents that have visited Europe in the past 14 days.
Besides many other industries will be hurt just as much and receive nothing. People won’t be going to restaurants, movie theaters, or concerts. They won’t be going to hair stylists and barber shops. They won’t be visiting car dealership showrooms. Each of those businesses will be hurting, and many will be laying off workers.
If you’re concerned about workers there’s nothing special about those workers being in the airline industry, and airline workers shouldn’t get more assistance than other workers displaced by the reaction to the novel coronavirus. Moreover the best assistance to workers isn’t likely to be protecting airline shareholders. Many airline employees will likely be furloughed regardless of assistance to their employers.
What we care about as a society is that an airline industry exists. The reason for government intervention is to prevent economic contagion (the spread of one failure to another). That was the argument for bailing out banks during the financial crisis, and it doesn’t exist in the same dimension with airlines. Nonetheless the industry is an important one once we’re ready to recover.
However the planes will still exist. The airports and gates will still exist. Skilled pilots and mechanics will still need work. The only reason to intervene will come later, if at all.
- Once airlines are in bankruptcy the relevant question is if they keep flying.
- And that’s dependent on available new capital during the bankruptcy process.
Shareholders should take their haircut first. By the way Warren Buffett’s Berkshire Hathaway owns about 10% each of United, Southwest, Delta, and American. Should taxpayers really be softening the blow to Berkshire’s bottom line?
Then the government should wait to see what develops in bankruptcy. Only if resources appear that they will become dormant should the government intervene with capital to put them back to use. If there’s no new money to fly aircraft, that would at least be an argument for government assistance. However even that should be weighed against whether there are yet passengers looking to fly. If not, the assistance is for naught – akin to Italy propping up Alitalia for years, with more money continuing to flow in a neverending cycle. Better to fund only the upkeep of parked planes until there are once again customers to fly on the planes.
Again the question of displaced workers is different, and should be addressed directly – not by giving the American people’s money to the same airline leaders that failed to use past profits to protect their businesses.
In 1903, after the Wright Brothers’ first flight, they went looking for government cash. Some things never change.