Coronavirus

United Airlines Received $5 Billion From Taxpayers to Protect Employees' Paychecks. Now It's Cutting Hours for 15,000 Workers.

Lawmakers who voted for the $50 billion bailout of the airline industry are just shocked at these companies' behavior.

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Passenger airlines received billions in federal grants to keep their employees paid in the midst of a near-total collapse in demand for air travel during the coronavirus pandemic. Some companies are nevertheless finding creative ways to cut employees' pay while still receiving government aid.

On Friday, news broke that United Airlines would be cutting 15,000 airport staff and baggage handlers' hours from 40 to 30 a week, converting them from full- to part-time status. The announcement came after a grim earnings report showing the company had suffered a net loss of $1.7 billion in the first quarter of this year.

United has also received $5 billion from the U.S. Treasury through the Coronavirus Aid, Relief, and Economic Security (CARES) Act's Payroll Support Program, including a $3.5 billion grant and another $1.5 billion loan. The company has also applied for another federal loan made possible by the CARES Act.

This follows similar actions by both Delta and JetBlue, who have both reduced employee hours in April to cut costs. Delta has received $5.3 billion from the CARES Act's Payroll Support Program. JetBlue received $935 million.

The CARES Act overall included $50 billion in support, split evenly between loans and grants, for passenger airlines. A condition of accepting this federal support—and indeed the stated purpose of this support—was that the airlines retain staff at the same pay rates.

The quickly passed law, however, does not specify anything about minimum hours or income, allowing airlines to cut hours while still ostensibly complying with the letter of the law.

In an email sent to the company obtained by The Daily Beast, United's Executive Vice President Greg Hart said that despite billions in federal support, his airline was still in the red.

"Even with a federal government grant that covers a portion of our payroll expense through Sept 30, we anticipate spending billions of dollars more than we take in for the next several months," wrote Hart. "That's not sustainable for any company and that's why we are making difficult decisions across our entire business."

Meanwhile, some union representatives and members of Congress are shocked that the legislation they supported would be used to bail out companies instead of supporting workers.

"Hundreds of thousands of [International Association of Machinists] members in every sector of our union proudly called elected officials and demanded action to protect the industries in which we work," wrote union officials Michael Klemm and David Supplee in an April letter to JetBlue and Delta. "Now, opportunist corporate actors such as yourselves are using that good faith support of airline workers around the country and at every carrier to screw your own workforces and greedily undermine the intent of the federal stimulus funds that you demanded."

On Friday, Klemm released a statement saying United's actions probably violated the CARES Act. (They did not.) He wrote that his union was considering legal action.

Rep. Sheila Jackson Lee (D–Texas) said, "It was not the intent of Congress for this program to be used as an economic bail-out" in a letter to Klemm, according to The Daily Beast, but rather to support its workers.

Sen. Josh Hawley (R–Mo.) has called on United to return the CARES Act money it received after learning that the bill he voted for allowed their employers to cut hours.

Perhaps Jackson Lee and Hawley should have considered the possibility that airlines accepting government aid would cut employee hours. They could have offered amendments to prevent that or voted against the legislation entirely.

They didn't, and airlines are now taking advantage of a loophole in the law. Both lawmakers and airline companies are culpable.

The cuts initiated by United are also a good example of the contradictory conditions placed on airline bailout funds. These companies were required to not furlough staff during a time of near-zero demand for air travel. At the same time, the CARES Act also requires these airlines to keep performing a minimum number of flights to destinations they served prior to March 1, 2020. The Department of Transportation is responsible for setting these minimum service requirements.

The result has been airlines burning fuel and cash putting nearly empty planes in the air just so they can access federal support.

At some point, something has to give.

One justification offered for bailing out airlines and other industries is that these businesses are losing money through no fault of their own. They didn't cause the COVID-19 outbreak, and shouldn't be punished for it.

Even if the unprecedented circumstances experienced by the airline industry make it more deserving of support, we're still left with the same flawed federal government providing that support. And once again, the federal government has proven it's not up to the task of centrally planning whole industries.

NEXT: The Trump Administration Did Not Support The Total Invalidation of the "Entire" ACA before the 5th Circuit

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  1. OMG!! WHO KNEW THEY WOULD DO THIS? I mean, besides everybody with a brain….

    1. . . . and a few members of congress

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    2. Most airlines do not actually own the planes they fly, but rather lease them. If the airlines use the cash to continue to pay workers for flights that do not happen and instead stop the lease payments, those workers will end up working for airlines with no airplanes.
      This does not sound like a long-term plan for success.

  2. >>Rep. Sheila Jackson Lee (D–Texas) said, “It was not the intent of Congress for this program to be used as an economic bail-out … but rather to support its workers.

    “Hey dummies we gave you da money so your bees would keep up with the payroll taxes …”

    1. Unintended consequences were not unforeseen.

      But that won’t let the pundits use this as an excuse to bash capitalism and the market. In fact it’s proof that we need more government controlling every aspect of the private sector. Sigh.

  3. Hundreds of thousands of…members in every sector of our union proudly called elected officials and demanded action to protect the industries in which we work.

    If you are proud to call the government and demand a handout your parents failed you. Exhaust your strike fund, commit to future CBA concessions and use your rainy-day savings before you ask for a penny of taxpayer’s money.

    1. My bank did not want a bailout back when bailing out banks was seen as a way to save capitalism from itself. They refused the bailout. But the government forced them to take it, becuse it would make the other banks look bad. So then my bank paid back its bailout early. But were again forced by the government not to pay it back early, because it would make the other banks look bad.

      Which is one reason why I’m sticking with my bank, despite other shady shit it has done. And why I will never do business with those banks who were first in line to suck government dick. You know, banks like Citi.

      1. Didn’t Ford Motor Co also try to refuse bailouts? I could be wrong but did they not end up being forced to take some in the end? Because we can’t make Government Motors or Chrysler look bad.

        1. And Chrysler pisses me off the most, they aren’t even an American owned company anymore.

          1. Nothing beats bailing out Chrysler with fiat currency

            1. Shouldn’t that be Fiat currency?

              1. Not if you expect it to work for long.

            2. Glad you chased away your alter ego asshole Kirkland, the useless POS.

    2. That may be the morally right thing to do, but the opposite of the tactically correct thing to do.

    3. Unions are happy to take advantage of a terrible situation. My brother is in a transit union and the whiners and hypochondriacs are having a field day getting ‘the man (employer)’ to cater to their whims because they’re an ‘essential employee’ now.

  4. https://www.washingtonpost.com/entertainment/music/kennedy-center-announces-250-more-layoffs-in-wake-of-25-million-federal-grant/2020/03/31/461d21ec-72b7-11ea-a9bd-9f8b593300d0_story.html

    Less than a week after being awarded a $25 million grant as part of the federal government’s $2.2 trillion stimulus package, the Kennedy Center is bracing for more layoffs. On Tuesday, the arts center announced that it will furlough 250 administrative staffers for five weeks, bringing its temporary layoffs to more than 1,100. The cuts — made days after musicians at the National Symphony Orchestra were told their paychecks would cease April 3 — reveal the deepening financial impact of the covid-19 pandemic on Washington’s preeminent performing arts venue.

    This latest round of cuts is spread across marketing, development, education, and the National Symphony Orchestra and Washington National Opera administrative departments and is necessary despite the $25 million grant, Kennedy Center President and CEO Deborah Rutter said.

    1. Just for the record; the cuts are not due the financial impact of the C19, they are due to the incompetent political response to the C19.

  5. In before all the Drumpfians who gargle his cum straight from his ass try to say this wasn’t his fault.

    1. i don’t even wanna know how he gets his cum into his ass.

      1. Spoken like a true bootlicker.

        1. ???

          I don’t discuss effluvium unless it is Obama’s, which I treat like my mother’s milk.

          1. Then we’re on the same side! We should meet in NYC sometime and have a beer together.

            1. I’m a bootlicker, not desperate.

              1. Ha! Even fake sarc gets shot down lololol

    2. Fuck off, Jeff. You aren’t fooling anybody.

      1. Says one of the cult members who wouldn’t care of Trump shot somebody on 5th Avenue.

        1. Can you leftist trolls get some new tropes? You’re getting boring.

        2. Vince Foster, Seth Rich and Jeffrey Epstein were killed by the DNC and Sarcasmic’s totally cool about it, so he thinks that the ‘other’ would be fine with doing it too.

          See, this is what the greatest fear of the left is, that the other side behaves like they do.

  6. So they got a loan but still can’t make their payroll because of decreased business. So they have to cut hours. The only bad thing I see about this is that the loan was taxpayer funded (actually debt funded) but otherwise I don’t see what is wrong with this. Sometimes you take out a loan and business still doesn’t improve so you still are forced to make cost cutting measures. It is basic economic sense.

    1. the loan was taxpayer funded (actually debt funded)

      This is why feds bailing out the states is so stupid. Why should the federal government, borrowing close to $3 trillion and counting already, over the normal $1 trillion, heave state debts onto its debt burden? States can just borrow it themselves.

      1. I actually saw an editorial today that was trying to claim that it will be red States needing bailouts from blue states. Hmmm wasn’t aware California and Illinois are red States.

  7. United has always been one of the worst of airlines for the longest time. When I had to travel all the time I did my best to avoid them. Even worse than American, if such can be believed.

    1. It’s true. Always is the longest time.

      1. That’s the amount of time your United flight is delayed if you have to make a connection on UAL.

  8. Note to politicians: if you actually want to help employees, just dump a bunch of money into the unemployment ‘insurance’ fund and be done with it. No new bureaucracy, no new regulations, no new nothing. Just actual help for actual employees that actually lost their job.
    I know it doesn’t have the photo op attached, but it is a lot more effective, and a lot less corrupt than what you did. Not to mention a bit less wasteful of tax dollars.

    1. Oh, wait. There are no payroll taxes on unemployment benefits; just income taxes, due next year.
      Not part of the equation, I am sure.

      1. What? You mean they did it that way because someone pointed out that the pyramid schemes of Social Security and Medicare would fail before the Boomers got their’s and that failure has to be kicked down the road a bit further?

        The state and municipal bailouts are similarly all about PERS payments?

        You so crazy!

  9. “Meanwhile, some union representatives and members of Congress are shocked that the legislation they supported would be used to bail out companies instead of supporting workers.”

    This sentiment only makes sense if you believe that the company cannot die as a result of the current economic mess caused by the pandemic, which is ridiculous.

    Accepting as a given for the moment that some sort of assistance is warranted, here is the question: Was the purpose of giving that $5 billion to United to pay its workers over the short term, or to ensure that United exists as a company to employ people on the other side of this pandemic when its revenues are severely limited for the time being through no fault of its own?

    I have no idea what United’s detailed financial situation and whether its moves are warranted or not. I also do not think the people criticizing them have any idea either. What good does it do United workers in the long run if the company ceases operations before more normal air travel resumes?

    1. What good does it do United workers in the long run if the company ceases operations before more normal air travel resumes?

      *** scratches head ***

      You know, some intriguing analogous questions can also be asked.

    2. They’ll just go under get creditor protection and come out the other side as the ‘new’ United with some of the same planes that was apart of the ‘old’ United.

  10. Lawmakers who voted for the $50 billion bailout of the airline industry are just shocked at these companies’ behavior.

    “Shocked! SHOCKED, I tell you!”

  11. They didn’t cause the COVID-19 outbreak, and shouldn’t be punished for it.

    If it were not for airplanes, we would still be waiting for the COVID-19 to arrive in NYC by boat. These companies are in the business of transporting people around the world. The risk of a viral stowaway is calculable and resulting liability or cost should be borne by them. As an industry, air travel has generated trillions of dollars in profit over the last 100 years all the while passing on the externalities. Perhaps it is time they reap what they have sown.

    1. Nice. I lost hundreds of thousands in retirement nest egg through no fault of my own. If we are “all in this together” then let’s all suck up our losses and stop demanding bailouts . That means you too Blue state governors.

      1. But the blue states are the ‘makers’ or so I’ve been told.

      2. Should have gotten out of the market when the senators did.

  12. Once again, I’m getting that bad feeling that forcing one-third of the population into instant unemployment might not have been a that great of an idea.

    1. NO! Or benevolent Lord technocrats are never wrong! Its you and your worship of money that is the problem! Do you want everybody to die! Now lets build a new economy based on love and togetherness or whatever that means.

  13. The quickly passed law, however, does not specify anything about minimum hours or income, allowing airlines to cut hours while still ostensibly complying with the letter of the law.

    How dare you insinuate that whoever wrote the largest bailout in history did so without putting a great deal of thought into it.

  14. So bailout to keep people on the payrolls doesn’t mean full time or full pay does it. But anyway let’s not ignore the obvious. The government doesn’t want us to start flying again. They keep throwing out scare numbers using models to make predictions that are mostly wrong. They want everyone to wear masks that won’t really help but will cow people into submission. They aren’t really opening anything up. And companies are not really letting their employees fly for business unless necessary. So how in the fuck are the airlines supposed to ride this out?

    The damage was done by government. Not a virus. Not business. But stupid fucking government goons and the bootlickers that like them.

    1. Which is a valid argument. It is sort of like the stories you hear about the people who get mad because their employers took out these loans to make payroll but the employees could make more money on unemployment right now.

    2. Bingo, give that man a cigar!!

  15. This has better not be true

    Or what? What enforcement did you put into the law that would punish this behavior. If the answer is nothing, then that’s on you.

  16. They didn’t cause the COVID-19 outbreak, and shouldn’t be punished for it.

    It’s not fair!!

  17. Well, its good to know that these airlines had the brains and foresight to buy lots of income interruption insurance or set aside cash in case of a downturn, just as happened after 9/11. In a real market society these airlines would be forced to the wall, close down and let smarter, better airlines, more consumer friendly and business brainier airlines, to take over. But not here with our crony, corrupt sugar daddy system. And of course the mainstream media which should be jumping all over this, doesnt even consider it news.

  18. The authors and many of the commenters simply do not understand the purpose of the CARES act, and Democrat legislators may understand it but then immediately pretend that they don’t so they can bash industry executives, which is good politics for them. The CARES act is designed to offer support to the companies so that they do not go bankrupt while the demand for their services dropped to zero, not to act as an indefinite welfare program for all the airlines employees. If there is no work then the company will eventually cut hours, furlough employees, OR GO BANKRUPT!

  19. It’s not just United, AA has cut my wife’s hours in half and as soon as September comes AA is going to lay a lot of people off…

  20. Regardless of if they got money or not, if there isn’t enough work to go around, there isn’t enough work.

    What are they just going to pay people to hang out and surf the internet on their phones? It’s not Bernie Sanders Airlines.

  21. Let all the airlines go broke. Someone else will start a new airline and maybe actually not treat everyone like cattle. The government acts like we have to keep the old airlines that many of us will drive far to avoid. Disgusting.

    1. Let all the ~~airlines~~ sports teams go broke. Someone else will start a new ~~airline~~ sports team and maybe actually not treat everyone like cattle. The government acts like we have to keep the old ~~airlines~~ sports teams that many of us will drive far to avoid. Disgusting.

      You could substitute a lot of businesses into this line of “reasoning” but, not many of them employ as many people as airlines do.

      1. Goddammit. I never seem to be able to make markdown work. This is why there needs to be an edit button (that and all the spelling mistakes and predictive texting f*ck-ups).

      2. Second attempt:

        Let all the airlines sports teams go broke. Someone else will start a new airline sports team and maybe actually not treat everyone like cattle. The government acts like we have to keep the old airlines sports teams that many of us will drive far to avoid. Disgusting.

        I hope I’m using the right syntax this time.

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