U.S. Airlines Looking To Pick Your Pockets For $50 Billion

Brother can you spare 500 billion dimes?

That’s how much U.S. airlines want from the federal government:

  • $25 billion straight up cash, right away in small unmarked bills
  • $25 billion in cheap financing

We’re now way beyond reduced landing fees at airports (moving the financial hardship onto government-owned airports) and a tax holiday on tickets (which would have to be made up by the government to continue funding aviation) but they’re asking for those things also and a rebate on excise taxes they’ve already paid this year too. Don’t forget Congressman Jim Moran after 9/11, “It’s an open grab bag, so let’s grab.”

U.S. airlines are seeking government assistance of more than $50 billion, including a mix of direct aid and loan guarantees, as the industry reels from the coronavirus outbreak, a lobbying group that represents 10 U.S. passenger and cargo airlines said Monday.

The aid, if received, would be the industry’s first bailout since the wake of the Sept. 11, 2001, attacks and the largest ever.

There’s no systemic risk to the economy from an airline failure so this isn’t something the federal government should be considering at all. Airline investors should lose money, the investment is worth less than it was.

From a societal perspective we do care about airlines being ready to fly when people are. The three largest U.S. airlines have been flown successfully through bankruptcy. They still have the planes, the spare parts, the gates and everything else that’s needed.

The only time to consider a government bailout is after equity holders take a haircut. An airline should go into bankruptcy, determine if there’s capital available, and if not only then should a decision be made about whether it makes sense to provide an injection of cash to fund continued operations during a restructuring. (And we should allow foreign investors to put in their cash before taking money from taxpayers.)

Doug Parker testifying on the need for subsidies to the US airline industry in 2001

Remember that funding from the Air Transportation Stabilization Board after 9/11 is what kept American West flying, and US Airways flying, such that Doug Parker and Scott Kirby were able to combine those two carriers and then take over American Airlines – and Kirby was able to go on to become the CEO-in-waiting at United Airlines. In other words these are the same guys that have been spending 11 figures buying back stock and are now asking for another bailout.

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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  1. LOL. The airlines manage a business, if they did not save money for a rainy day then its on them. they should have saved cash to maintain operations for 30 days at least. What a shame.

  2. Hey Gary. I m assuming you re a multimillionaire already from doing what you do. You re against the govt giving money to the airlines, however, if they do go bankrupt and lets say shut down, all the miles and points would vanish with them. If there is a person in the woods of Montana who never got a credit card and walked the trails to travel, then i would get this point of you. Sitting in your international first class seat and collecting credit card application referral $, maybe you should stay quiet at least??? Maybe that would be more honest?

  3. What about thousands of highly skilled pilots who have gone many years of training and paying off 6 figure loans to make $40K a year (yes most pilots are regionals guys and we are quite poor as it is ). I was just about to go to mainline. You think these kinds of jobs don’t deserve some level of protection ? What else does a pilot go do? Degree is Aeronautical Science. Think about those guys up front who keep you safe and have kept you and your family safe for countless flights through all the weather. You think airline management treats YOU badly … what do you think we go through ? Maybe with contingencies or rules but airlines do need to be saved here. Pilots jobs need to be protected for everyone’s sake. Very few professions require the amount of $$ we put in for the money we make. We are not even close to replaceable.

  4. At first when I saw this NYT headline, I thought it was written by you. When I saw that it was not, surely I thought you must have been quoted, though again, you were not. Become even more public with your commentary about this topic, Gary. You have strong credibility with your “real” job and with your airline industry coverage and experience. Find a way to testify before Congress. Not kidding. https://www.nytimes.com/2020/03/16/opinion/airlines-bailout.html

  5. If you are for bankruptcy instead of financial assistances of some kind, then you need to be ok with a federal bankruptcy judge unilaterally eliminating your frequent flyer miles as part of the reorganization plan! While ending an existing frequent flyer program may have never been done before, bankruptcy judges have wide latitude. And eliminating your airline miles helps to save the planet!


  7. Not a dime. SEP, 2017, Doug Parker, “..I don’t think we’re ever going to lose money again. We have an industry that’s going to be profitable in good and bad times..”.

  8. Yah @frank, if only this was “just a rainy day”. By the time the this shakes out, it will be shocking to learn the numbers for the airlines. Even now, the numbers are unconscionable. Doubtful He realized this type of extreme situation when Parker expressed confidence in never losing money again.

  9. STFU Gary. If the airline industry collapses, then millions of people are out of work (airlines, airports, vendors, etc…). And then there’s the issue of how you restart a functioning global economy without airlines…

    I’m a lifelong left of center Democrat – and this is one event where a bailout is clearly needed. It’s not 2008 and the airlines aren’t the banks…

    Massive amount of economic support and relief is also going to be needed at the retail and consumer levels of the economy as well.

    Perhaps you should stick to credit card deals, Gary, and not economics.

  10. @Bob – Then why not just support workers directly? Instead of directing any potential subsidy resources to the corporations, what about directly subsidizing people whose lives will be affected in terms of their abilities to pay their mortgage/rent, utilities, health care? And then if there are unusual expenses and costs to restart the airline industry, why not provide funding at that time? What is the particular advantage to giving funds to the airline industry first over other industries, or more importantly, individuals?

  11. Perhaps some of this is mismanagement, and regardless that travel would certainly be down… the government has told private industry “you may not do business”. In that scenario, they deserve some help. Now, can we bail out ever small business, restaurant, movie theater, concert theater, etc. after this is done? Not sure about that. But the airline industry is a centerpoint of economy and if it fails, the economy will never restart.

  12. Bob – bankruptcy does not meal “the airline industry collapses” each and every one of the three largest US global carriers have been through bankruptcy, the predecessors of some of them more than once. Read what I’ve written, I outline a time and role to consider government involvement. The equity holders get wiped out, not taxpayers. Then creditors get the airline. And if more capital is needed to continue to use the resources and fly, and private industry won’t supply it, that’s when to consider a bailout – not to protect the jobs of management and to buttress current shareholders.

  13. @Dougie – an airline that is going to remain a going concern has more value with its mileage program intact (that’s the most valuable asset they’ve got)

  14. @real_jetsetr – thanks, I actually disagree with the micromanaging the airline business in exchange for government money, what could possibly go wrong…?

  15. Totally agree. Equity holders should be wiped before bailout or at least diluted from government infusion. Cash handout is ridiculous.

  16. I think there’s a big difference between “we might not make money this year” and “we’re gonna shut down because we can’t pay the minimum bills to keep our company open”, the airlines are at the first one right now and are asking for government assistance so they can ensure they are profitable in 2020 so they can pay out large executive bonuses for weather the storm successfully.

  17. Wow. Just wow. So A4A cries crocodile tears about (certain but not all) foreign airlines being subsidized then want gigantic subsidies themselves because they lacked the foresight to save money during wildly profitable years? Too damn bad. The stockholders were happy to profit when times were good so now those same stockholders need to feel the pinch when times are bad.

  18. Ugh, it’s sad to read comments from the likes of Bob. It’s ironic that he questions someone else’s grasp of economics. Here’s a hint, Gary’s post isn’t about economics.

  19. Agreed Gary. This isn’t a bomb wiping out half of an airline’s planes, it is a fluctuation in demand with static supply. Demand will return, and all the jobs with it, regardless of the name on the plane.

  20. @Gary

    No beef at all. I respect you and read your blog. Collected millions of miles from cards myself, been doing that since 1995. However, when airlines collapse, tourism collapses behind it, millions of jobs, people lose their livelihood. Not to mention that getting a rewards card becomes pointless if miles are forfeited.

    Taking the risk that Chapter 11 does not mean closure and will only force reorganization and lower costs is not at all worth it. We all criticize Ryanair and other low cost airlines for tight seating, no service etc. Do we want to be standing in a plane on “Sky Bus Airlines?”

    When you take a selfie on an Asian Carrier First class that you booked on card referral miles, enjoy it! I could have started a blog 20 years ago (when i was already earning an “offline blogger” to my friends) but i didnt. That means you deserve to travel First for free and post selfies, you started the blog, i didnt. It IS fair, because doing something and Not doing it cannot be rewarded the same.

    I do respect your laissez faire kind of political views on the aviation industry, but, this is not one airline wasting its cash on unprofitable routes or high salaries to executives. This is a global force majeure that is far from maturing, the catastrophe will be completed if governments around the world do not step in to aid their airlines…

    If you disagree, write an article on your vision of the world in 2021 with fewer airlines globally. (and analyze what that will mean for fares, number of passengers, the hotel industry, restaurants, retail and beyond)

    Airlines is a critical part of the chain, if it breaks, then we ll be going decades back…

  21. It’s our welfare program. In good times CEO and management gorge on debt, buyback stock and cash in their options for millions. In bad times we get to bail them out.

    It’s correct that airlines will not vanish. Control may move from equity holders to debt holders (and then perhaps to another stronger set of debt holders) That’s the way it should be. While miles are the biggest asset of an airline if we all lose our miles it would still be the right thing to do.

    Many advocate for policies that would hurt them financially. I do. I strongly advocate for removal of the carried interest loophole. So Kudos to Gary for advocating for what’s right

  22. Bob- where would all the money come from to bail everybody out? We are already trillions and trillions in debt.

  23. Something to think about – Since citizens united allows corporations to donate as people, I wonder how much of this will wind up in Trump’s campaign coffers?

  24. Since when did this blog become a daily political rant by Gary ? Enough is enough. Get back to reporting on FF programs.

  25. @everyone. This will pass. Look on the bright side, maybe Bastian, Kirby and Parker won’t be around any more. Their bankruptcies may cause the ” Bailout Boys” to lose their jobs. Geez, one can only hope. As for Gary, he’s passing the news around that we need to know. Good for him. Everyone will return including the pilots whose major part of their profession is to get up and down safely. Amen, and a hearty toast to the FA’s who have to put up with us. See you on the other side.

  26. The airlines have made more profit than anyone. No money for them. Hit up the CEOs

  27. Even as a guy who owns a lot of airline stock I completely agree. Demand will be back in 12 months time, if the airlines don’t have enough cash on hand to weather that short of a recession because they were busy paying me big dividends and buying back stock, then that’s the price an equity holder will have to pay. Government can step in and save the company after equity holders get wiped out without costing too many jobs as other investors will put in money During restructuring. I don’t deserve a bailout.

    Not sure why everyone is freaking out about your comment, weren’t the bank bailouts somewhat across the board viewed a necessary but “i can’t believe we had to do that” situation?

  28. If we give a bailout, we should get something in return. How about no bag or seat fees for the bailout

  29. Airlines are seeking government-funded cash bailout, but what about their over-60 customers who are being told to avoid all unnecessary travel? Refunds? No way — a voucher usable until the end of the year (9 months) and only as a credit towards whatever fare they’re charging then. This is worthless to thousands (millions worldwide?) of passengers who don’t have the freedom to fly whatever month they want to, or don’t want to take a rainy cold weather holiday in place of their spring/summer plans to Europe. I’ve got insurance against my wife or me becoming injured or ill, but I can’t insure against Europe being closed or catching Covid-19 at an airport which could kill me after I start my trip. Any bailout should at a minimum be conditioned on offering seniors a full refund of all pre-booked plane trips.

  30. Well let’s talk about Boeing too, who is standing there with their hand out.
    Maybe they could sell some of the $100Bn of stock they’ve bought back the last seven years or so first….

  31. There is a reasonable case to be made that some of this is the fault of incompetent government action, and non-action.

    On the other hand, any business that expects competence from government is itself grossly incompetent.

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