The federal government is a huge buyer of travel and negotiates fare contracts route by route with the nation’s airlines. These are good fares in normal times, though in many cases above market during current times.
President Trump has an idea to help the airlines make it through to the future, while getting a deal for taxpayers: pay up front for several years of travel, but get a bigger discount from the airlines for doing it. He spitballed his plan during the $484 billion coronavirus bill’s signing yesterday.
[W]e’re the biggest user of the airlines, United States government, and one of the ways we can help the airlines is buy tickets at a very large discount, maybe 50% off or maybe more, and you buy into four or five years worth of tickets and you infuse them with some cash.
And in the meantime, we’re flying the people of our country for a fraction of the cost than it would be when the airlines get back. They will get back. So we’re thinking in terms of as additional, because the airlines are all set right down, but as an additional incentive where we buy tickets in advance at a very big discount, which I’ve liked really from the beginning. And we’re not up there.
Look, the fact is that the airlines are going to be fine the way it is now, but I like that as an additional help for the airlines. I like it both ways. I like it for us too. We’re the largest user of the airlines. So you buy tickets. I don’t know. This sounds good, right, if we get a good discount?
This means taking the risk that airlines are still here when it comes time to fly on these pre-purchased tickets. And it’s not a very good deal for the airlines – it means cash now, but lower profits later. But why do they need cash now?
- Airlines continue to access financial markets to raise liquidity (and at lower cost thana “very large discount” on future travel represents)
- The federal government is already giving them money without a requirement of free travel in exchange
It’s far less complicated to administer what the Treasury Department is already doing, which is taking warrants in exchange for aid. That’s giving money to the airlines, while getting something in return for taxpayers. It doesn’t require tracking advance ticket purchases and assigning them to specific trips.