Tag Archives for subsidies.
The head of world airline trade group IATA says so far governments have provided subsidies to carriers totaling $160 billion. But that’s not enough and they believe governments need to hand over more.
And what’s the terrible thing that will happen if they don’t? Something that is entirely and completely normal and happens all the time during normal times: some airlines may go out of business. That’s ok.
The CEOs of the 7 largest U.S. airlines told Congress that unless they get a second bailout by the end of the year, don’t expect them to ship vaccines. It’s an idle threat. They’re telling their own workers they’re ready and eager for the vaccine shipping business.
Subsidizing flight attendant salaries makes no sense if you’re talking about readiness of cargo flights. And there are better ways that funneling huge unrelated subsidies to airlines to ensure a business is ready to deliver on a big commitment. Just follow the Operation Warp Speed model and guarantee the purchase of cargo capacity to allow the airlines to plan for it.
Alison Sider of the Wall Street Journal asked whether Delta supports a CARES Act extension (airline payroll support), since Delta CEO Ed Bastian hasn’t been nearly as public on the issue as others like American’s Doug Parker.
Bastian was in a tough spot.
American Airlines CEO Doug Parker pressed the case for another bailout today, saying without more government aid they’ll eliminate service to some small cities. And that’s true, but misleading.
How is it that spending on airlines, supported by both Republicans and Democrats, is what’s under consideration and nothing else. How did we get here?
Another airline bailout isn’t just something being snuck into a $2.2 trillion piece of legislation, but is the only standalone action Congress might take at this point. That may be shocking, but it also makes a lot of sense.
It’s no surprise now to see him take to LinkedIn to tell the story of a flight attendant encounter, emphasizing why he sees more government subsidies for airlines as important. Only this time his argument is that his airline, which furloughed more employees than any other carrier by a wide margin, has gotten too old. Or at least that a flight attendant tells him that furloughing younger employees means they now miss the youth on board their planes.
Government subsidized loans had different employment rules than those contained in payroll support. They didn’t specify ‘no furlough’ they talked about the employment levels that airlines had to retain through September 30. Airlines receiving loan approvals did not meet these conditions.
When airlines gave the government a stake in their businesses, effectively partial nationalization, they created an incentive for the government to continue bailing them out to protect and grow that very stake.
Pumping in another $25 billion makes Secretary Mnuchin’s stock warrants, obtained for bailouts, look better – like he negotiated a ‘win’ for taxpayers.
American Airlines closed on a $5.5 billion government-subsidized loan last week. It can be increased to $7.5 billion. Six more airlines though have closed on loans under these conditions: United Airlines, Alaska Airlines, Frontier Airlines, JetBlue, Hawaiian Airlines, and SkyWest. Treasury didn’t immediately release the amounts borrowed by each airline, or the collateral used.
Both Democrats and Republicans are calling for $25 billion in additional subsidies, under the guise of protecting workers (although that portion costs less than 10% of the total).
American Airlines has been threatening to leave small cities if Congress doesn’t extend another $25 billion in payroll support. However one of the provisions of the CARES Act says an airline taking subsidized loans – which American just did – can be ordered by the Secretary of Transportation to continue service to small towns, as well as anywhere that it’s necessary for pharmaceutical supply chains.
No further legislation or subsidy is required to insist on continued air service. Any city losing American Airlines air service now only does so because the federal government has decided to permit it.
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 »
