The Always-Evolving but Still-Bogus Argument for Airline Bailouts

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Airplanes of German carrier Lufthansa parked at the airport as air traffic is affected by the spread of the coronavirus in Frankfurt, Germany, March 16, 2020. (Kai Pfaffenbach/Reuters)

Airlines want a bailout. If they need to change their argument to get one, they don’t mind doing so.

First, it was that they needed the money to keep their employees. Bailouts are also sold as being about workers, but in reality, they are about creditors and shareholders. Airline bailouts are no different. Once the first bailout was about to expire, airlines asked for another $25 billion so they wouldn’t have to furlough roughly 40,000 employees.

As my colleague Gary Leff and I explained here, once again the math didn’t add up. If the bailout was truly about supporting some 40,000 airline employees for six months, assuming roughly $50,000 per worker paid out over that period (i.e., $100,000 annually), airlines would only be around $2 billion, not the $25 billion package that they are asking for. In other words, the bailout would go to pay for employees that the airlines had no intention of furloughing but whose salaries they would rather have shouldered by taxpayers.

Now, they claim that they need taxpayers to pay for their employees so that they can distribute the vaccine. Here is part of the letter that seven CEOs sent pleading for more money:

As the nation looks forward and takes on the logistical challenges of distributing a vaccine, it will be important to ensure there are sufficient certified employees and planes in service necessary for adequate capacity to complete the task . . . We respectfully ask that you come together and extend the successful PSP this year so that we can continue to support our critical aviation workforce and infrastructure . . . Your leadership is needed before the close of the 116th Congress so that this bipartisan and incredibly effective COVID-relief measure can continue to save American jobs and allow us to continue our significant role in the health of our U.S. economy.

Don’t buy it. This is the opposite of what they’re telling their own employees. Three of the seven airlines that signed the letter aren’t really geared to shipping cargo anyway. Besides, it is hard to see how subsidizing payroll for flight attendants who work passenger flights or frequent-flyer program staff would contribute to the cargo delivery of vaccines.

A bailout is also the worst way to go about guaranteeing cargo capacity. Leff writes:

If you are concerned about airline readiness, there’s a proven model. If there really was a risk airlines wouldn’t prepare to accept this shipping business, you’d simply take the same approach that Operation Warp Speed took with Pfizer as it developed its vaccine – pre-purchasing the product: guarantee airlines a certain amount of shipping business so that they can invest to be ready for it.

Leff has more good arguments here, including: “American Airlines is telling its own employees they expect to bring people from furlough even without subsidies,” and that “J.P. Morgan Chase told investors last month to expect another payroll bailout, most of which would be money straight into the pockets of airline equity. And they told investors that once airlines got the second bailout, to expect them to ask for a third.”

Read the whole thing here.

Veronique de Rugy is a senior research fellow at the Mercatus Center at George Mason University.





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