Kyle Stewart at Live and Let’s Fly argues that as distasteful as the $58 billion U.S. airline bailout was, it was needed.
As far as I can tell only (part of) one sentence actually addressed why the bailout was ‘needed’:
if the country is to resume after Coronavirus has passed, we will need every worker and company back in place as they were.
Except this doesn’t support the need for bailouts. It is true that airlines that aren’t operating do take time to start back up:
- planes coming out of storage
- pilots getting current with required takeoffs and landings, simulator time
However there’s no actual case that ‘without bailouts airlines wouldn’t continue to exist.’
We do not need the full capacity of airlines back online immediately, there won’t be demand right away for full capacity. There just needs to be some capacity.
A bankruptcy-first approach would have meant equity and creditors take a haircut before taxpayers. It’s not at all clear a bailout would have been needed even then.
- Liquidity markets remain open to the airlines, over the past few weeks Delta, American and United have each raised an incremental 10 figure amount of cash (smaller Alaska raised $500mm).
- None has yet tapped their frequent flyer programs for cash.
- Why wouldn’t debtor-in-possession financing have been available, though if it wasn’t the question of government funding could be raised at that point?
- Southwest for its part doesn’t even know if they’ll take the money.
Many airline workers would be furloughed under this scenario. To use United’s ballpark, 60%. But the bailout then is costing about $13,000 per month per worker – with management and senior captains making $300k+/yr fully bailed out by taxpayers, where the median US income is $30k – and that only defers layoffs through September. United says it doesn’t prevent them.
Furloughed workers need assistance in the same way restaurant workers do, personal trainers do, movie theater employees do, there’s no reason for a separate $58 billion bailout for airline workers that’s first a bailout of shareholders and debt holders.
Of course it’s not even the first time we’ve bailed out the airlines. The Air Mail Scandal involved improper postal service contracts determining which airlines survived and which failed. The money for the first big American Airlines aircraft order came from the Reconstruction Finance Corporation (CEO C.R. Smith introduced FDR’s son Elliott to his second wife and was best man at their wedding).
Current American CEO Doug Parker secured ATSB funding after 9/11 for America West and then took over ATSB bailed-out US Airways. His deputy Scott Kirby, who drove that US Airways acquisition now runs United, which lost its last CEO in a government favors scandal.
The U.S. airlines have long survived on government cash and government protection from competition (whether through foreign ownership, or long term gate leases at government airports). We continue to feed that, and then complain when effectively nationalized airlines don’t deliver the product consumers want. We have only ourselves to blame.
By the way will people finally acknowledge that Delta, for instance, isn’t actually opposed to government funds in aviation, they’re just opposed to things that do not benefit Delta?