Texas Senator John Cornyn is calling for more airline subsidies and the arguments being deployed now are even crazier than before.
These payroll subsidies have become more expensive and cover a shorter period of time, even though airline payrolls are lower than they were during the first bailout. And deploying the argument that vaccines won’t be transported without airline subsidies is both terribly cynical and untrue.
‘If You Don’t Give Airlines Subsidies, They Can’t Transport Vaccines’
Before United and American furloughed a combined 35,000 employees at the beginning of October, they were warning that very bad things would happen to the U.S. economy as a result. And while it’s truly unfortunate for the airline employees who lost their jobs, there turned out not to be much systemic risk to the economy. And government aid wasn’t necessary to keep employment at other airlines like Delta intact.
Now they’ve shifted to making the argument that airlines are needed to distribute vaccines. Of course domestic aircraft like Boeing 737s and Airbus A320s aren’t going to be carrying significant cargo. Yet Cornyn says,
Particularly for rural and small town Texans, we need to strengthen the distribution system now so that when a COVID-19 vaccine is approved, we’re ready to send lifelines to as many Texans as possible. This is about more than saving jobs, it’s about saving lives.
Did American Airlines CEO Doug Parker or United Airlines CEO Scott Kirby really tell Cornyn that Embraer ERJ-145s running around rural and small town Texas are going to be carrying significant amounts of vaccine cargo?
Initially there’s going to be far more cargo capacity than there is vaccine, while vaccine production ramps up. This isn’t an emergency where we have to worry about airline cargo capacity, with the U.S. on the verge of emergency authorization for the first vaccine.
To the extent U.S. airlines play a role in vaccine they’re ready to do so without subsidies. American Airlines has told employees they’re ready to ship vaccine. United Airlines CEO Scott Kirby says they already “expect to be a leader in distributing vaccines around the world and look for more to come on our leadership role there.” The airlines themselves say they are ready and happy to take the vaccine shipping business. The lack of (a second round of) subsidies will not prevent them from doing so.
Doug Parker posted to Instagram that they are “getting ready to play a critical role in distributing #COVID vaccines as soon as they’re ready” not ‘as soon as we get more federal subsidies’.
And noted they ‘successfully moved a trial of a major pharmaceutical company’s thermal packaging from Miami to South America‘ (emphasis mine) which is an example of the kind of cargo role major U.S. airlines will play. That’s important, but for obvious reasons that’s not the clear message airlines are sending to Congress and on TV when trying to link a second U.S. bailout to pharmaceutical transport.
Much of the airline cargo role will be in international transport, moving the vaccine to the world rather than bringing the vaccine the last mile to Americans. E.U. doses of the Pfizer vaccine will generally be manufactured in Germany and Belgium while U.S. doses will generally be manufactured at U.S. plants. A global supply chain is part of this, and serviced by shipping companies like Federal Express an UPS.
In any case the subsidies being proposed aren’t targeted at vaccine transport readiness. Flight attendant salaries don’t need to be subsidized to support cargo flights in any case, and flight attendants are the bulk of airline furloughs. The U.S. government can ensure cargo capacity, though, by contracting for it up front the way Operation Warp Speed purchased vaccine doses before a vaccine was proven. There’s no need for separate subsidies and shipping charges.
And American Airlines is even telling furloughed workers to expect to return in 2021, without subsidies. But why would subsidies be needed for Delta Air Lines payroll – to be ready to ship vaccines – when they never furloughed anyone to begin with?
Payroll Support Is Getting Even More Expensive, And Giving Less In Return
Airlines were asking for $25 billion in payroll support to cover six months of payroll. That was for October through March.
Cornyn’s bill though ups the ante to $25.5 billion. It’s unclear why airlines get $500 million more than they were even asking for. And though it might not happen right away (seems unlikely before the the next Congress), this would again only require them not to furlough workers through March.
With approximately 40,000 airline employees in total furloughed, that’s a cost of $637,500 per job. And to the extent the clock starts running January 1 (which seems early) and goes through March 31, 2021 it’s an annual run rate of $2.55 million per job. J.P. Morgan Chase expects airlines to get the money, and then to ask for a third bailout to keep paying workers past March.
Airlines have already shed substantial numbers of workers from payroll. Non-union employees were let go permanently, at American they say they’re saving $500 million a year by terminating non-union staff. Yet the amount of payroll support asked for has remained constant or even gone up. (The subsidized loans airlines took as part of the CARES Act may even have been illegal because of this reduced headcount.)
Cornyn is calling not just for commercial airline subsidies, but to pick up $300 million in payroll for cargo airlines as well, because reasons.