By Hemal Gosai
Opinion: Airlines Are Shilling for Third Bailout. That Can’t Happen.
Late last year, the impending arrival of vaccines for COVID-19 stood as a glimmer of hope for the travel industry. Many thought vaccines would help travel return and begin down the path toward normalcy for airlines. But even now, with multiple vaccines beginning distribution, that optimism has quickly soured.
There are a few reasons behind this.
The first is that vaccine rollout wasn’t as robust as many had hoped. People are getting vaccinated at a slower pace than expected. While it is ramping up day after day, there is nowhere near the infrastructure in place that should have been in place on day one of distribution. Fewer people being vaccinated means herd immunity via vaccination is still quite a ways away, meaning that eagerly-awaited travel bump also continues to get pushed back.
Second, there are the new COVID variants that first surfaced in Brazil, the U.K. and South Africa. These strains are believed to be more contagious than previous strains and also show a greater tendency to reinfect some people who had already recovered from COVID-19. The vaccines currently being distributed are said to be effective against these new strains, though efficacy may be somewhat diminished.
This does nothing but compound on the bleak outlook for travel. These new variants are getting enough media attention to put off some people from traveling. Most importantly, however, parts of the world seem to have learned their lesson when it comes to letting COVID-19 spread to some degree. The U.S. recently put in place a requirement that incoming passengers into the country must show a negative test result, nearly a year after COVID-19 began infecting people around the globe.
Some nations are also putting in place or lengthening existing travel bans, and other countries are continuing their mandatory quarantines for all incoming passengers. Canada recently announced extremely strict entry requirements that kill off anything but the most essential travel. The country has joined the ranks of other countries like Australia, which have taken strict measures to limit the importation of the virus.
All of this has unsurprisingly culminated in U.S. airlines going to the government for a third time asking for a bailout, again totaling billions of dollars. The current and second round of aid given to airlines summed to $15 billion, and its terms are set to expire on April 1.
American Airlines and United Airlines have already started warning employees that cuts are coming. The two airlines are saying they could cut 27,000 jobs combined when current funding expires.
This will mark a year during which airlines were effectively subsidized by the government. According to airline payroll figures and JP Morgan research done before the second round of airline stimulus published by ViewFromTheWing, payroll for furloughed airline workers totaled approximately $250 million per month in late 2020, meaning only $1.5 billion would be needed to pay for those workers for six months. However, taxpayers footed the bill for nearly $14 billion in grants, meaning 90% of the money was almost certainly headed to other parts of the business.
Delta even boasted about how it would not involuntarily furlough any flight attendants because of their “culture and creativity,” even as the airline turn around and took billions in payroll support. These bailouts are just federal unemployment benefits being administered by airlines with extra steps. Demand really isn’t going to recover for a while now, and airlines need to resize appropriately.
Arguments such as one propagated by some politicians on both sides of the aisle, that needing bailout money to be ready to carry vaccines, are nonsensical. Airlines are seeing record demand for cargo, and it’s one of the few areas in airline operations that is actually making money. Flight attendants account for the majority of airline furloughs and are rarely, if ever, found on cargo flights. Airlines will fly — and make money off of — vaccines, no matter what.
Sure, people aren’t paying the exorbitant and creative ancillary fees in droves as in years past, but airlines are still finding ways to take money out of the pockets of taxpayers. How long fleecing taxpayers will continue to line the pockets of airline shareholders remains to be seen, but it likely won’t end anytime soon.
Hemal took his first flight at four years old and has been an avgeek since then. When he isn’t working as an analyst he’s frequently found outside watching planes fly overhead or flying in them. His favorite plane is the 747-8i which Lufthansa thankfully flies to EWR allowing for some great spotting. He firmly believes that the best way to fly between JFK and BOS is via DFW and is always willing to go for that extra elite qualifying mile.