The Math On Another Round Of Airline Payroll Bailouts Is Insane. Has Nobody Done The Math?

CNBC’s Leslie Josephs summarizes what’s at stake in airline lobbying for a second round of payroll bailouts,

U.S. airlines have warned more than 75,000 employees that their jobs are at risk on Oct. 1 when the terms expire on a $25 billion federal aid package that protects passenger carrier workers’ paychecks, about a month before Election Day on Nov. 3.

…A push by airline labor unions and later, company executives, to include another $25 billion for airline payrolls to keep jobs through the end of March has won bipartisan support from lawmakers and from President Donald Trump.

Airlines have already gotten employees to agree to leave ‘voluntarily’ within the terms of the CARES Act. American Airlines, for example, took a scalpel to 30% of management employees – reducing payroll by about $500 million per year. Southwest Airlines says the voluntary early retirements and leaves its unionized employees have taken mean that it doesn’t have to furlough anyone this year.

However once October 1 rolls around and airlines are permitted to let go of employees, because restrictions from the last payroll bailout have lifted, job losses will happen because there’s less consumer demand for air travel and airlines need fewer employees to operate flights. That’s a condition the airlines say is likely to last until 2024.

Airlines and their unions have asked for a ‘clean extension’ of the payroll support money, another $25 billion. However if that’s to save 75,000 jobs through March 31, 2021 that amounts to $333,333 per job and come April 1 we’ll see job losses again (when it’s not election season).

I’ve called this the most expensive unemployment program in history because,

  1. It’s unemployment, not a jobs program it ensures people continue to get paid their salaries when their companies no longer need them to work.

  2. Forget $600 a week, the price tag is insane. $600 a week for 75,000 workers would be ‘only’ $1.17 billion. The airlines want $25 billion. The covers, as American Airlines has said, around three quarters of 2019 payroll. But no airline is laying off that many people. The funding is for full pay not just for people who would be laid off, but for at least as many people who wouldn’t. In other words, it’s a subsidy to airline equity and debtholders.

I love the travel industry, and I love the people I know who work for airlines. Many of them in management are already gone. The ones that are left face a disruption in their lives and that is sad. But the best thing for many of them is to move to the next chapter in their lives. That’s better for the economy, and policy should focus on helping with that – not giving them makework job that delays transitioning people productive roles, delays economic recovery.

Paying full 2019 payroll costs that’s more than airlines would lay off, and where the numbers are based on payrolls much larger than they are today – Southwest and Delta each have already reduced current payroll by 17,000 – makes no sense at all.

Indeed there’s no universe in which is makes sense to spend $333,333 per job to delay furloughs for just six months. That can’t even make sense in a presidential election year, when the President doesn’t want to see job losses and where the Democrats want to deliver pork to unions.

About Gary Leff

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 »

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Comments

  1. @ Gary — Every one of these politicians should be replaced. I am furious. I pray that they are unable to agree to anything. Nonprofits can fund voting and feed the unemployed and homeless in the meantime.

  2. Gary, you are quite correct! Why the hell would taxpayers pay >$330K for jobs that fail to come close to economic realty?

    Airline Boards and their unions need to reject the false promises offered by drinking the Kool-Aid, as we are rapidly reaching a point of disgust with such an egregious waste of tax dollars.

    Oh, this reaction should also impact corporate management, even Board members, for their overt failure of stewardship.

  3. I presume that the airlines wouldn’t promise that each employee would actually receive $10,000+ a week until April?

  4. Southwest CEO offered a very decent and attractive package to employees to retire early. So no furloughs are nesseary. American Airline offered packages for employees to retire that is shameful. SHAME on American Airline for not caring more of their employees.

  5. You all dont understand. This is about funding passenger safety, because that is job one. If not for these loans, there would be nobody to instruct you how to put an oxygen mask , or to refuse you water on a transcon. Just keep saying “for the safety of the public” and the American taxpayer will keep signing checks.

  6. The airline industry is a joke these days. It seems that they can’t do math either; I wouldn’t either if I was paid $10 per hour.

    Flying these days and during a pandemic is both annoying and time consuming due to all the delays and lost baggage. It would be much cheaper and easier to just drive to where you want to go!

    It’s about time we say no to the airline bailout and let them suffer due to lack of leadership and common sense.

  7. @ Louise Despite their generous retirement offer, many takers, and saying no need for furloughs this year, Southwest is still asking for a second bailout.

  8. No Grants!!! Maybe low interest loans but The Govt needs to get options in return. IMO they shouldnt have gotten what they did in Phase 1, why not Hotels, Car Rentals, any biz for that matter. Enough, hey maybe the over paid employees will have to come back down to earth and see they arent the high and mighty they thought they were, alot have been way over paid till now

  9. Hi Gary,

    I agree with you completely. This is a complete waste of taxpayers’ money. I am amazed that people on both sides of the aisle aren’t outraged by this. The airlines themselves admit that they need to downsize, so why are the people in the airline industry due such an enormously larger amount of what is essentially unemployment than the rest of us?

    My only question regarding the well outlined critical piece above, is how did you come up with 75,000 jobs being potentially saved as a consequence of another $25 billion giveaway to the major US airlines? I am guessing that they would argue that the # of jobs saved (even if only for six months) would be a greater number (hence your $333K per job being too high).

  10. Somebody in Washington must be getting their pockets lined. I have a hard time believling they are that bad at math.

    Thanks for the important coverage!

  11. @Gary,
    There was no math, or even simple strategic analysis, used for the first round of the bailout. So, why do you expect any sort of math or analysis used for the second round??!! 😉

  12. We need to be BLASTING airline CEO’s over this and the politicians. Folks Biden said it 4 months ago to the face of a UAW: Joey said: I do not work for you, you work for me. That is pure Tyrannt language. Joey, I left your party after hearing that. You ARE a public servant, not the other way around.

  13. Probably not the best time to bring this up, but should we remind Ed Bastien of his continuous berating of the middle east airlines and their govt sponsored subsidies?

  14. The US airline bailouts are just flushing American taxpayer money down the drain.

    The US airlines need to right size using their own resources, even if that means airlines filing for bankruptcy to perform a financial reorganization yet again.

  15. Perhaps the federal cash would be better used to set up a National Unemployment Program which would supplement the states’ programs. This would benefit ALL displaced workers, not just the ones from a single industry. We pay state AND federal taxes, so why does unemployment insurance only get paid at the state level? And some states are very stingy with those benefits to boot.

  16. @Jon – the number of reported WARN act notices, as reported in the quote from CNBC, though that number is high since tt’s the maximum furloughs that could be coming October 1 [American for its part said they sent notices to more than they’d likely need.]

  17. Your vendetta against airline staffers to the point of wishing them unemployed is incredible. I’ve kept quiet- but since we’re all getting fired anyway, here goes. I served you on your BA trip with ref FRDWJO where you assassinated the character of numerous flight and ground staffers. You and your wife are the most entitled people I’ve ever met. 1st Class is NO an excuse to act however you want- I’ve seen celebs behave with more class and humility. Fortunately us staffers have ways of marking your profile accordingly- future people who interact with you will know what to expect.

  18. The money isn’t just for payroll. The airlines are flying most of their routes at a loss and that is where the majority of the money is going(fuel/Mx/ aircraft payments/etc.
    The article is totally inaccurate.

  19. @Bill perez – the money is legally only permitted to be used for payroll – you’re right, since money is fungible and more than is necessary to prevent furloughs is being given to airlines, it’s effectively going to subsidies other costs. That’s my exact point.

  20. @BritishAirStaffer – excuse me? You must have me confused with someone else. I have never had a booking reference FRDWJO nor did I ever ” assassinate[..] the character of numerous flight and ground staffers” at any time.

  21. WOW. Bunch of mouth breather decided to lean on their keyboards and respond to this article. Same people that want to fly to Disneyland for $99 round trip, get a BOGO and first class at the same time, and most likely don’t want to go back to work because they make more money on unemployment. This article hopefully was written on his toilet in-between wipes. Next time you decide to sharpen your pencil and whip up one of these mud pie articles with no intelligent factual information. Put down the pencil, paper, and calculator. FART IN A BAG AND POP IT IN YOUR FACE.

  22. I think it’s super special that the above comment criticizes this piece for lack of “intelligent factual information.”

    Of course in between insults there doesn’t seem to be disagreement with any of the facts here. Make of that what you will.

  23. @Gary, every time I think I have reached the limit of my expectation on how low some people’s IQ can get, I have a rude awakening by people such as “@Gary Fart-Brain Leff” !

    They cannot even process the fact that the money marked as “Payroll Bailout” cannot be legally used for anything else but payroll.

    They think pointing out pure and simple corruption in the system is proof one is extreme leftist (or some other non-sense label).

    I am not sure how to have a logical discussion with these people… I think that is *my* problem: I expect people to engage in “logical” discussion (based on academic definition of ‘logic’).

    I just need to lower my exception of (most) people… These days I just do not engage with these people. They seem to enjoy anything but logic: name-calling, character-sabotage, etc.

  24. @John “You ARE a public servant, not the other way around.”

    You seem unaware that Joe Biden is a private citizen, which is why he took exception to a man telling him “You work for me.” No, sir, he was wrong, and you are just as wrong. If he gets elected, THEN he works for us…not before. Get a clue, John.

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