There’s no arguing with the fact that air travel has mostly ground to a halt during the coronavirus outbreak. Plenty of media outlets have been featuring pictures of empty terminals and TSA agents standing idle as they wait for passengers. This means that revenue for the major air carriers is plunging. So yesterday, as the deadline for applying for help from the government arrived, all of the airlines applied for grants to bail them out. Please note that these are not loans the airlines would have to pay back. They are grants. In other words, “free money” to keep them afloat. (Associated Press)
Delta Air Lines, American Airlines, United Airlines, Southwest and JetBlue said they applied Friday for their share of $25 billion in federal grants designed to cover airline payrolls for the next six months. None disclosed the amount they are seeking.
The grant money was part of $2.2 trillion relief bill approved last week. Delta’s CEO says his airline is burning more than $60 million cash per day, and United’s president puts it at $100 million a day. Airline revenue has cratered during the coronavirus outbreak. Delta carried 38,000 passengers last Saturday. On a normal Saturday in late March it flies 600,000.
Yes, yes… we get it. The number of people flying on Thursday of this week was down 95% from the same day last year. More than one-half of all commercial airline jets globally are currently grounded. Things are tough all over.
So Uncle Sam – and all of you taxpayers out there – are just going to bail them out? We’ve already covered the numerous reasons why this is a bad idea and totally not needed. But even if it is going to happen, there need to be some serious protections provided for the taxpayers and the airlines need to put something on the table to make this all worthwhile.
Sadly, CNBC looked over the grant application details and it doesn’t look like that’s going to happen in any meaningful way. It appears that the major air carriers are only being asked for two things in exchange for the massive taxpayer-funded grants they are seeking. First, they have to promise not to lay off their workers or cut their pay until the fall. And second, they may be required to give up as much as 2% of their equity stakes… to the federal government.
What direct benefits are there in this for the taxpayers and the air travel passengers? Will the airlines be promising to bring seat sizes and legroom back to at least tolerable levels? Will they fix their broken mileage reward systems? How about some actually edible food on long flights? Nope. Nothing of the sort.
I’m not cheerleading for anyone to lose their jobs, particularly in the current environment, but this is simply a bad deal. As was noted in the analysis that I linked above from Richard Squire, a professor at the Fordham University School of Law specializing in corporate bankruptcy law, there is a much simpler and cleaner model that would save the airlines without hanging the taxpayers out to dry. They can simply go into chapter 11 bankruptcy protection (just as every one of them successfully did between 2002 and 2011) and emerge back into profitability when the pandemic has passed and normal air travel resumes. Does that mean that most of their workers would be laid off? Almost certainly. Not to be too heartless about this, but why do airline workers deserve special treatment?
What about all of the waiters, waitresses, bartenders and cooks who are out of work all around the country? Where’s their bailout? What about the rest of the literally tens of millions of Americans who are currently being sidelined? All of those airline workers would qualify for federally enhanced unemployment benefits just like everyone else and they would be collecting up to one thousand dollars per week straight through until the airlines are back up and running at full capacity.
And where did the idea to have the airline give up a percentage of their equity stakes to the federal government come from? You should probably realize that what we’re talking about here is the partial nationalization of the airline industry. So we’re bailing them out to create another federal revenue stream? Seriously?
This entire deal is garbage and it’s not even needed. In their desperation to look like they’re at least “doing something,” Congress has sold its citizens down the river yet again. And in the process, they’ve reaffirmed the “special” status of the airlines above all other businesses in the United States and allowed more socialism to creep into the system through nationalization of the private sector.