Watch Your Wallets: Transportation Secretary Says Let’s Talk About Another Airline Bailout In The Fall

There was absolutely no reason to bail out the airlines and for the overall economy – and for workers who will lose their jobs anyway – the bailouts were actually destructive.

However the President won’t want to see mass layoffs one month before the election when CARES Act payroll subsidies expire and airline lobbyists have begun to suggest the idea of a second round of funding.

The argument that won politically the first time was saving jobs, but job cuts are actually coming by mid-July even though workers have to be paid through September, and airlines didn’t exactly play fair with use of funds from the first bailout.

Nonetheless, Transportation Secretary Elaine Chao isn’t ruling out another bailout and says it’s something to discuss and consider in the fall, if airlines need one.

“Let’s see what happens when most of the money is” distributed, Chao said, noting that “drawdown” has not yet occurred for much of the funds that have been allocated. “I think for most entities, the time when they will be rethinking about the need for additional cash, will not come about until September, October.”

The aviation industry has signaled that furloughs or layoffs may be imminent after Sept. 30, after the stipulation in the CARES Act that required airlines receiving money to take certain steps to maintain their workforce will expire.

“A weakened airline industry is not good for America,” she said. “This is an essential service.”

She doesn’t want to commit yet – airlines haven’t taken money from the loans half of the bailout so far, just the payroll grants (and have benefited from the waiver of airline taxes).

While American has said they plan to take CARES Act loans other airlines have taken a wait and see approach, suggesting they’re fine accessing market capital and they want to understand whether the government subsidized loans are better.

However Chao is very much leaving open the door to the Administration supporting a second round of taking money from the American people that they wouldn’t spend voluntarily, and giving it to airlines.

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. Elaine Chao was on the board of Wells Fargo during all their shenanigans so what’s her angle here? Take some more money, but contribute to McConnell’s reelection? Or open a maintenance facility in Kentucky?

  2. Wait a second: are you now arguing that the CARES Act is DESTRUCTIVE to airlines? And you’re basing that on the statement of an Obama administration official? Um, news flash: nobody relies on economic advice from Obama officials, for obvious reasons. Meanwhile, so far, the CARES Act is looking BRILLIANT. I was skeptical of some parts of it — like I think it is overpaying airline employees compared to workers in other hard hit sectors — but it is undeniably working REALLY, REALLY WELL right now. Instead of facing economic ruin, the airline sector is already RECOVERING. Did you see AA’s stock price today? It was up more than 40%! Why? Because it’s bringing back tons of flying next month. This is obviously good for AA, but it’s also helping the hard hit and very important travel industry recover — much quicker than most people expected. None of this is surprising. Unlike basket-case industries, the USA airline industry is well run and highly profitable. They were just victims of the Ultimate Black Swan Event. The government stepped it and got them through this crisis. And now you’re unhappy about this? Heck, this is even going to speed the recovery of YOUR business pitching airline credit cards and such! In fact, you may already be seeing an increase in credit card kickbacks. I guess you’re not grateful for it?

  3. Well, it’s now 2 days since this crazy post was written, and it sure hasn’t aged well. Check out what the stock market — including airline stocks — has done since then (based on the record job rebound)! If this is what a “destructive” gov’t policy does, I’ll take more of it, please. 🙂

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