Why Airline Bailouts Are Getting Priority In Congress Over Unemployment, Testing, And Covid Treatment

We’re really through the looking glass now that 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, leaving aside more pandemic unemployment, bailouts for state and local governments, or further investment in public health during the Covid-19 crisis.

How on earth did we get to a place where President Trump is calling on Congress to send him a bill to hand $25 billion more to U.S. airlines (after the CARES Act appropriated $50 billion)?

  • It’s couched as needed to prevent furloughs, that have already happened, afffecting around 35,000 workers – or $714,000 per job actually saved and just for six months
  • That would hand billions to airlines that aren’t even furloughing anyone
  • It’s clearly an airline bailout, not a ‘passthrough to workers’, at a time when airlines have shown no difficulty accessing private capital markets
  • And there’s no systemic risk to the economy at this point, airlines all report they’re well-capitalized. Yet taxpayers are being asked to take a haircut before shareholders or creditors.

How Do Airlines And Their Unions Trump The Interests Of The American People?

For the purpose of this post I’m interested more in “what planet are we on?” that spending on airlines, supported by both Republicans and Democrats, is what’s under consideration and nothing else. How did we get here?

And I’m reminded of Guy Vander Jagt, who was a Michigan Republican Congressman from 1966 to 1992 when he was primaried by Pete Hoekstra. Something he said so struck me that I remember it 30 years later. He said that people were so inconsistent. All he’d hear about in Washington was how much the government needed to do and how much spending was necessary, then he’d go home to Michigan, talk to people there, and he’d hear about overspending and too much government. And he didn’t seem to understand that he was hearing from different people.

Members of Congress hear from the airlines – American’s CEO Doug Parker has practically been living in D.C., commuting back and forth throughout the week. Airline unions have been vocal, turning out their membership to rallies both in the District and in the home districts of Senators and House members. And they’ve bombarded representatives with emails and phone calls, often the same employees sending messages over and over (American Airlines President Robert Isom explicitly encouraged doing this in an employee forum last month.)

And Members of Congress don’t hear from the people whose money is being taken and given to the airlines. And that’s because of concentrated benefits and dispersed costs, an idea that comes to us from Mancur Olson in The Logic of Collective Action. People who benefit from a policy have an incentive to learn about it, focus their time and energy on it, and spend money to influence it and pass it. When benefits are focused on a small group, that group will act. And when costs are dispersed across hundreds of millions of people, there’s little cost to each individual, and there’s little incentive for that person to spend time and resources opposing a policy (or even paying attention to it enough to understand what’s happening).

Why Are Airlines Succeeding In Washington Now?

Airlines are always lobbying for their own interest, and they’re certainly more heard whenever there’s discussion of new legislation or regulation affecting the industry. That’s why it’s always surprising when people believe that new legislation or regulation will >Benefit consumers against the airlines.

But since they’re always lobbying, why is it only now that they’re on the precipice of being handed (another) $25 billion in taxpayer money? And for that we need to understand the Overton Window. (I knew Joe Overton, he was a friend of mine, and saw him weeks before he died piloting a small aircraft 17 yaars ago.)

In order to accomplish a policy you don’t just need to advocate policy through lobbyists. The policy has to be ‘on the table’ and it needs to be focal. It became part of acceptable discourse as we’re spending trillions of dollars at a time (so $25 billion doesn’t seem that much) to address a crisis, and with ‘tens of thousands’ (exaggerated by the airlines as hundreds of thousands) of job losses at U.S. carriers coming right before a Presidential election.

This Isn’t A Corruption Story

Notice that this isn’t a story of corrupt politicians. It isn’t a claim that ‘airlines and unions donate to candidates, who then do their bidding.’ While political contributions help give interest groups a voice, gaining access to Members of Congress also means getting to know them, gaining their personal sympathy by building friendships.

But this story allows for politicians to even think they’re doing the right thing, representing their constituents well (giving them what they hear people saying they want), as well of course as acting in their own self-interest because it’s right before an election and giving constituents what they want is how they expect to be re-elected.

There’s nothing unique about airlines in this regard. It’s just that airlines happen to be what’s on the agenda at this moment. But ‘concentrated benefits and dispersed costs’ frequently explains how one side’s voice is dominant in a debate over an issue that comes into an ‘Overton Window’ of focus.

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. Unions Unions and Unions. As usual the taxpayers will foot the bill. It is now anticipated that 2022/23 is when the real “bill’ will begin to come due for us taxpayers. Interesting that is when most of the European Governments are also sensing their “D” day.

    The issue with all this airline aid is that when it’s over they’re going to layoff workers anyway due to the schedule and demand changes we all know thats coming. Once again Congress kicks the can down the road instead of facing reality head on. BOTH sides of the isle or should I say battle zone.

  2. Back in March or so, you predicted all of this. You said that there’s no public reason to prevent airlines from going bankrupt. They’ll come back just like they have every other time. It would have been chaotic to let them go bankrupt, but this new round of bailout proposals shows that we’re handing these airlines billions and they don’t protect passengers or employees. This bailout only protects the shareholders.

    I appreciate you pulling on this thread for months and publishing a story like this that puts all the pieces together.

  3. One of the best pieces I’ve read from you in probably years, Gary. Your insights are relatively unique and extraordinarily well articulated. You manage to avoid slinging mud, which helps both sides to read and understand the argument.

    Such a cogent piece on politics is rare. Kudos, sir!

  4. Breaking news: They will NOT get stand-alone support. I’m GLAD!

    If they want to live on the dole, force them to become public utilities. wipe out the shareholders and the executives and WE, the people, will own it all.

    Or perhaps we could assist the pilots with a program that allows them a basic living assistance (rather than paying their six-figure salaries) while they search for other work. Oh wait! We already have that. It’s called unemployment. Maybe they should take that instead of being treated like something special rather than glorified bus drivers.

  5. Even on a widely read blog, this view won’t get the attention it deserves. Have you considered a letter to the editor to the WSJ, NYT, Washington Post?

  6. There’s no valid reason to continue to provide preferential treatment to the airlines and meanwhile ignore so many other devastated industries, such as lodging establishments, restaurants, retail shops, and the list could go on. The power of the airline lobbyists and related unions is driving this expensive bailout. Let the marketplace decide the winners and the losers, not politicians (who are invariably wrong about such things). What a waste of money.

  7. Airlines get traction in Washington because almost every member of Congress flies home on one monthly if not weekly.

    Even if they aren’t deliberately trying to look out for their own interests, people pay attention to what affects them personally way out of proportion to what affects everyone as a whole. In the last 40 years an entirely new field has emerged, behavioral economics, that studies that tries to understand effects like this one (and how they can distort good decisions making).

    Lots of industries have gobs of well paid lobbyists but no issue resonants with senators and congressman than this one simply because of they way it affects their and their family’s quality of life the entire time they are in office.

  8. @ Gary — Still hoping this moronic bill dies. Airlines should get ZERO additional government assistance until they have exhausted all other solutions, which includes borrowing on the open market and, sadly, laying off thousand of workers. If this waste of money passes and the old Republican party ever makes a return (not likely), they may get my votes for Congress one day. In the meantime, Orange Hitler and President McConnell must go.

  9. Interesting viewpoint.
    Are you saying President Trump then is Pro “Union” are you??? (Just to be clear I am not saying President Trump is pro or anti Union. but many Union members are in his base, but just not the Union leadership).
    President Trump and Mnuchin have said President Trump wants a stand alone Airline Bailout bill that help mostly Unionized Airline employees.
    What they don’t want is a whole new bill giving away more trillions.

  10. Let these bums go down. They should’ve saved for possible problems rather than buying shares and giving themselves lavish bonuses. Privatized profits and socialized losses-the Rethuglican Way. Ridiculous.

  11. Money is fungible. You give the airlines a bailout, they redistribute their income to stock buy backs, executive bonuses, salary freezes (not cuts) to management, and so forth. You are absolutely right Gary that we have state-ran airlines at this point.

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