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It’s no secret the pandemic has ravaged the airline industry. In April, U.S. administration agreed to give the airlines a $25,000,000,000 (yes, billion) bailout to provide some relief.
As a condition of accepting the CARES ACT bailout, US airlines agreed to maintain service to all US airports they had previously served through 30 September 2020 and pay payroll.
Well, time is running out and airlines are assessing, both, the routes and employees they plan to eliminate…or are they?
PUNISHING AIRLINES BY NOT PROVIDING MONEY
Furlough restrictions expire after September 30 and some airlines have said they are going to furlough thousands of employees, literally, the next day.
However, in addition to the current administration, politicians from both sides of the aisle, are supporting a second airline bailout.
According to Reuters, yesterday, the Secretary of Commerce Wilbur Ross said:
The reason the White House might be receptive to a stand- alone deal is that it’s not right to punish the airlines differentially because of coronavirus,” Ross told Fox Business Network, adding: “We’ve got to bridge the airlines … bridge their employees if we can through that period” until there is a COVID-19 vaccine.
The airlines have already received $25 billion in payroll support and another $25 billion in subsidized loans (total $50 billion).
Thousands of employees have permanently separated from the airlines through early retirements and buyouts. And as other industries continue to struggle (e.g. restaurants, hotels, practically everyone, etc.) without talk of further assistance, we’re punishing the airlines by NOT giving them a second bailout?
Furthermore, in my estimation, airlines are planning to let go of ~40,000 employees (American Airlines = ~19,000, United Airlines = ~17,000, and Delta = ~2000 pilots). $25 billion divided by 40,000 jobs is $625,000 per job per six months (or $1.25 million per job annually).
Am I wrong? I can hear my grade school math teacher saying “show your work!”
You may be asking “what about the other airlines like Southwest?” Well, Southwest Airlines did not accept the second half of CARES Act money which came in the form of loans. The airline used the “payroll support” to subsidize payroll and interestingly, the airline has said they have no plans of letting any workers go.
As we approach the winter travel season (the slowest travel season of the year), there will clearly be less demand for travel.
Similar to the every winter, I suspect the airlines plan to operate fewer flights, thus require fewer employees. Airline executives have speculated that demand may not return to pre-COVID19 levels until 2024. Does it make sense to continue paying people for another 6 months?
I know memories are short but remember, these are the same airlines charging you $200 to change your flight, charging you money to take your clothes with you on vacation, cramming more seats into the airplane, making the seat thinner so they can fit more seats in the plane, and now they’re going to take your money even if you don’t fly on them.
What do you think of this (second) bailout?