$75 Billion in Band-Aids Won't Cure Ailing Airlines

The grants and loans Congress has approved for the airline industry aren't about saving jobs.


Regal Cinemas announced recently that it will temporarily close all 536 of its U.S. locations as the COVID-19 pandemic rages on and continues to keep customers away. This move will affect approximately 40,000 employees across the country. And yet, nobody in Congress is talking about a bailout for Regal.

Now compare that with the airline industry.

Congress passed a $50 billion bailout for the airlines in April of this year, with $25 billion in subsidized loans and $25 billion meant to keep most airline workers employed until the end of September. As predicted, since consumers weren't ready to fly yet, this taxpayer-funded Band-Aid only postponed the inevitable. American Airlines and United Airlines just furloughed 32,000 employees. Yet, in this case, most legislators—from House Speaker Nancy Pelosi (D–Calif.) to a large number of Senate Republicans to President Donald Trump—want to bail out the industry.

We're told that a new injection of taxpayers' money is about saving airline jobs. But it's hard to believe that this is really what it's all about. As mentioned above, nobody is talking about bailing out Regal to save its workers. Moreover, as my colleague Gary Leff and I show in new research published by the Mercatus Center at George Mason University, the math doesn't add up to support the arguments that a second airline bailout is about the workers. If the bailout were truly to support upwards of 35,000 airline employees for six months, assuming roughly $50,000 per worker paid out over that period (i.e., $100,000 annually), the bailout would only be around $1.7 billion, not the $25 billion package that Congress is talking about. What's more, if the bailout is indeed another $25 billion for 35,000 jobs, that would cost taxpayers $715,000 per job saved—for only six months.

Bolstering the claim that this isn't about protecting jobs, much of the payroll support would give money to airlines that aren't furloughing workers to begin with. These points should put an end to the argument that the bailout is to prevent furloughs. But it doesn't. Airline representatives have argued that the bailout would not only be beneficial to freshly furloughed workers but also protect against the termination of workers currently on leave. Don't buy it.

First, there's no indication that airlines plan to furlough those workers. If they did, they would have had to notify them 60 days in advance of the furloughs, which they have not. Second, if the concern is that airlines might make additional, yet-to-be-announced furloughs, then that's an even bigger argument against payroll support. It suggests that the industry isn't expecting to do better anytime soon if they feel the need to furlough the on-leave workers who aren't costing them a dime.

As I said, saving jobs isn't the primary reason for this bailout. It never is.

It's also worth noting that some companies are taking a different approach to retaining their employees. For instance, Southwest is asking its labor unions to accept pay cuts to prevent furloughs and layoffs through the end of next year. Others, such as Singapore Airlines, have done the same. Airlines also have access to capital markets and have many durable assets that they can sell or use as collateral to secure additional financing, even during a crisis. And even without selling these lucrative assets, airlines can also turn to their co-brand credit-card-issuing partners for liquidity like they have during past financial challenges.

Sadly, as long as demand for air travel remains so deflated, there's no way to avoid airlines restructuring and slimming down their payroll. Subsidies provided through the cover of payroll programs aren't necessary to protect an industry that could restructure through bankruptcy. Airline bankruptcies aren't the equivalent of an airline collapse. They can continue to fly safely during the process where a judge imposes a stay on creditors' claims and gives the airlines breathing room until consumers are ready to come back.
Importantly, the bankruptcy process is fair. It shifts the cost of this crisis onto those airline investors who make good returns during good times and should shoulder the decreased value of their investments, instead of taxpayers. Without a bailout, airlines won't just be flying the friendly sky, but the fairer sky—for all taxpayers, including Regal employees.

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  1. …. the COVID-19 pandemic rages on…..

    1. the COVID-19 panic rages on

      FTFY. Just needed to cross out the dem

      1. “the COVID-19 panic rages on

        FTFY. Just needed to cross out the dem”

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  2. Covid-19 will cause this issue for sure.

  3. Regal Cinemas announced recently that it will temporarily close all 536 of its U.S. locations as the COVID-19 pandemic rages on and continues to keep customers away.
    It doesn’t have anything to do with the governments of New York and Los Angeles shutting down cinemas.

    1. Not to mention California and Los Angeles making it much harder for Hollywood to make new movies. It’s not just the customers. No point in opening a cinema with no movies to run.

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  4. Sadly, as long as demand for air travel remains so deflated, there’s no way to avoid airlines restructuring and slimming down their payroll.

    Idiots whistling past the graveyard. Given that mask-wearing and social distancing and avoiding crowds is now the new normal and a permanent part of the landscape, increased demand for air travel is never going to return. When you add in the fact that the Green New Dealers are determined to eliminate air travel for all but the special classes, the airlines are doomed. Wake up and smell the coffee, folks, subsidies aren’t going to save your dinosaur asses.

    1. Of course, the same applies to Regal and the movie theater industry, as well as sports, concerts, bowling alleys, zoos, amusement parks, and any other industry that relies on packing a lot of people in a small area – your industry is doomed because these “temporary” coronavirus public health mandates are never going away and in fact are only going to get worse.

      1. Zoos are a slightly different case. Sure, they can cut back on staff dedicated to running guest amenities such as food vendors, but they can’t exactly cut back on the staff that cares for the animals.

  5. “And yet, nobody in Congress is talking about a bailout for Regal. Now compare that with the airline industry.”

    Government picking winners and losers again. Where’s my shocked face?

    1. How are the two remotely comparable? Minimum wage low skill workers compared to high wage high skill workers in an essential sector. Jesus y’all are stupid.

      1. some workers are more equal than others?
        recessions, creative destruction, matching supply with demand, whatever you call it, no job is guaranteed.
        good thing there will soon be all those high-paying GND jobs needing to be filled.

        1. And all those out-of-work miners available for new coding gigs.

      2. “…Jesus y’all are stupid.”

        Looks like that lefty pile of shit pod has a new handle. Same idiocy, however.

      3. If their skills are irreplaceable, airlines will hire them back when/if demand increases.

        1. H is probably worried that they’ll be forced to take jobs at Micky D’s and never be allowed to leave!
          Employers can do that according to lefty shits like our newest one.

  6. Can de Rugy actually be this stupid or does she know she’s lying? Airlines directly employ 750,000 people, and unlike Regal Cinema, those employees are highly skilled and highly paid and serve a critical industry that is essential to the movement of people and goods around the globe. The $25B grant could only be used to meet payroll expenditures, so yes it did help people keep their jobs. Now that it has expired, there will be layoffs — about 35,000 so far but much more likely. If you think this is expensive, try multiple airline bankruptcies.

    1. All of which is totally irrelevant.

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  8. Airlines need to shed excess capacity, and government subsidy should not merely sustain the status quo.
    Even with a vaccine tomorrow, airline industry will see permanent changes in how people fly. Much business travel has been replaced by more frequent, and easier, Zoom type meetings. Businesses are going to see the benefits of shedding travel expense, and not loosing employees work time spent as travel days.

  9. Regal needs better lobbyists.

  10. Airports probably should board people into modules and then convey these modules into the size-of-plane that the actual boarders need so as to shuttle everyone at the least expense possible without stopping to pick up more passengers elsewhere.

  11. Fuck the airlines – through a time where social distancing was mandated in all public aspects of life, the airlines were given an exemption to this to continue to box people in to tiny spaces like fucking veal cattle.

    1. Well, Delta is still spacing passengers on its flights. I don’t believe the others are.

      1. I may have been wrong, but I think jetblue and Southwest are also spacing empty seats on flights.

  12. They have billions of dollars with of planes, let them borrow against that. Where I live, tourism and hospitality are screwed, airlines aren’t anything special

    1. They don’t own them. AerCap and GE Capital Aviation Services do. And they expect to get paid, by the way.

  13. I’m an airline pilot. I’ve absolutely been given a furlough notice. Yes the company is negotiating for paycuts to avoid furloughs but the senior pilots my vote for full pay for them and thus furloughs for the junior pilots.

    This is a royal mess. Air travel as you once knew is likely over. I know all sorts of folks will cheer, but how are ya going to travel in the future? I think flight availability will be less and prices higher. We will see.

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