US Airline Executives Take New Tone On Government Aid

Filed Under: Advice

Much of the travel industry has been asking for government aid, given the unprecedented situation we’re in. There has been a lot of controversy surrounding US airlines requesting government aid, given that they’ve used much of their profits over the past many years on stock buy backs, rather than saving up for a rainy day.

US airline executives’ latest letter to Congress

Today a letter has been sent to Congress signed by most major US airline CEOs — they’re taking a different tone with their message, but also painting a very grim picture of the future if they don’t get any assistance.

This letter is signed by the CEOs of most major US airlines, including Alaska, American, Delta, Hawaiian, JetBlue, Southwest, and United. It’s also signed by the CEOs of Atlas Air, FedEx, and UPS, as well as the CEO of Airlines for America.

Here’s the letter, in its entirety:

Dear Leader McConnell, Leader Schumer, Speaker Pelosi and Leader McCarthy:

On behalf of 750,000 airline professionals and our nation’s airlines, we respectfully request Congress to continue to move expeditiously to pass a bipartisan proposal that includes a combination of worker payroll protection grants, loans and loan guarantees and tax measures.

Time is running out. The worker payroll protection grants are critical to saving the jobs of our employees. Over the past week we have communicated to our employees the dire situation we are in and the potential impacts on them if our government doesn’t step up to help.

We are doing our part. Over the past decade we have reinvested over 73 percent of our operating profits back into our people and product, creating good paying jobs at a rate that has outpaced other sectors. As a result of a global pandemic and government actions to contain it, we are now undertaking over $30 billion of self-help measures, including asking our employees to take voluntary unpaid time off, parking planes and trying to obtain financing in today’s credit market. Those markets are closing up. Given the extreme nature of this situation, we respectfully urge Congress not to pursue opportunistic measures that will hurt, not help our ability to recover. Unless worker payroll protection grants are passed immediately, many of us will be forced to take draconian measures such as furloughs.

If Congress is able to reach a bipartisan agreement on these three critical elements, airlines are committed to ensuring that:

  • If worker payroll protection grants are enacted, equaling at least $29 billion, participating passenger and cargo air carriers will not furlough employees or conduct reductions in force through August 31, 2020.
  • If loans and/or loan guarantees are enacted, equaling at least $29 billion, participating passenger and cargo air carriers commit to:
    • Placing limits on executive compensation;
    • Eliminating stock buy backs over the life of the loans; and
    • Eliminating stock dividends for the life of the loans.

The breadth and immediacy of the need to act cannot be overstated. It is urgent and unprecedented.

We are united as an industry and speaking with one voice. We urge you to swiftly pass a bipartisan bill with worker payroll protections to ensure that we can save the jobs of out 750,000 airline professionals who are coming to work every day to serve the traveling and shipping public.

Key takeaways from this letter

I have two key takeaways here.

First of all, this paints a really grim picture of the current situation. That’s not a surprise (at all), but they’re making it very clear that without government help, airline workers are about to get furloughed.

My second key takeaway is that airline executives are finally starting to have a better narrative here. Up until now their “ask” has come across as out of touch, given the actions of the airline industry in the past few years.

But I think they’re taking exactly the right approach now:

  • They’re being very specific in wanting worker payroll protection grants, loans, loan guarantees, and tax measures; they’re putting frontline workers first here, and that’s important
  • With at least $29 billion in payroll protection grants, the industry is promising not to furlough any employees through at least the end of August 2020
  • With at least $29 billion in loans or loan guarantees, the industry is promising to place a limit on executive compensation, and is promising to eliminate stock buy backs and stock dividends over the life of the loans

I’d be curious about what kind of limits they intend to impose on executive compensation. I’m also intrigued by the concept of promising no furloughs. I largely support that, though the reality is that aviation is more or less coming to a standstill, so will they just pay most employees in full while largely not working at all, or…?

Bottom line

While there are many things I find frustrating about how the US airline industry is run, that’s largely just reflective of corporate America. I think the above letter is perfectly written, and the airlines have come a long way in how they’re presenting their case.

They’re making this about airline workers and are promising limits of share buybacks and executive compensation, which has been a concern for many.

What do you make of this “ask” from US airline executives?

  1. While this bailout may be necessary, it is phrased more like a blackmail threat than a potential solution. Interestingly no mention of limits to or suspension of executive pay or board member fees. I don’t agree it’s the right tone. Sounds more like a threat to me. Socialisation of debt and privatisation of profit again.

  2. I think they payment dividends and restrictions on stock buy backs needs to be banned until they can set up a certain fund with certain limit, let’s call it the “rainy day fund”. Once that fund is replenished overtime, then only then, they can resume dividend payments and stock buy backs. Otherwise they will need a bailout every crisis.

  3. I’m not for or against public support, but the choice’s effects will fall entirely on labor which is the significant burden on airline companies. I also think there’s merit to require all companies and individuals to have a rainy day fund of 6-9 months worth of expenses averaged for the past 3 years – mandatory savings.

    There is no situation where any company or individual can sustain indefinitely zero income yet nonzero expenses.

  4. I don’t think the taxpayers should be asked to pay the salaries of a particular industry. That’s what unemployment insurance is for and that should be provided and even for an extended period of time. Why would the airline employee be deserving of pay via the federal government when everybody else is not? It’s nonsense. The other half of it I have no problem with loans As long as the mentioned restrictions are in place on compensation dividends etc.

  5. I thought these airlines had massive profits and were “never going to lose money again”, per one American Airlines CEO. An overwhelming majority of net cash of these airlines have been wasted on stock buybacks. No surprise they’re hurting in lean times. The US taxpayer will probably begrudgingly bail out these airlines.

    I hope that many strings come attached to the money. Comprehensive worker protections from ground staff to in-flight crew first and foremost. Consumer protections like the EU has in place. Caps on executive salaries, etc.

  6. As a tax payer I do not share in the profits of any airline. So why do I have to share in their loss?
    I hope they all fail. Any new airlines that come from the ashes will learn their lesson.

  7. They should enter bankruptcy before we taxpayers simply fork over money as grants.
    Not opposed to senior secured loans but a direct cash transfer with no repayment?
    Perhaps, perhaps, a grant to the extent that they have any carried-over losses still outstanding, since we weren’t going to get that money anyway…

  8. All buybacks are is a return of capital to shareholders that the company does not plan to use. The way it is supposed to work is, if they need capital for some investment, expansion or acquisition, they can always go back to the capital markets and raise the capital they need for whatever their new purpose may be. They can either issue more equity, issue a bond or borrow from their bank or commercial paper market if it is for some smaller need of capital on a near term basis. The problem now is that panic has closed all forms of capital raising. And as you can imagine, pitching to investors that the purpose of the capital is so that we don’t die is not a compelling investment thesis. I mean sure we could ban buybacks and force companies to retain earnings in cash on their balance sheet. But before you know it, that capital will lead to chasing expensive acquisitions or other sub-optimal uses of capital in an effort to generate some return on idle capital. We need to stop pretending there was some bad behavior that caused their predicament. There isn’t. Buybacks are just a scapegoat used by people that don’t understand finance.

  9. So the rest of us who lose jobs and have to take unemployment don’t get bailed out, but an industry who has squandered money for the past decade gets to whine and cry like babies…..NO.

  10. @ Alan
    “As a tax payer I do not share in the profits of any airline. So why do I have to share in their loss?”

    Either way, you are going to share in the loss. The question is which loss is bigger? Just remember to factor in the cost to the taxpayer of losing 750k employed people earning 90k each and paying 20k each in taxes every year and turning them into 750k unemployed people that the taxpayer needs to pay $13k each to for 26 weeks of unemployment.

  11. @Rob – That really shouldn’t be anyone’s concern for supporting 300 billion in bailouts (hotels and airlines). It’s not our jobs to support their employees. Your probably a person who bitches about having to leave 20% at a restaurant but rationalize this. The reality is the government has allowed this with mergers to where we have created an industry to big to bail. The problem is it’s not. We have solutions for this. They can go through the bankruptcy courts like everyone else would have to.

  12. I have a $3700 credit from United on a canceled biz class fare. Looking at dates in August and September and fare is $1500 more. Screw the airlines. Let them fail. Why should I bail out somebody like Doug Parker. Reward him for his ‘leadership.’ Same with Boeing. Screw them too. I’d rather give my bailout to the local shopkeeper.

  13. let them fail. If anything they might force our hand to let other foreign carriers into our domestic airspace and actually provide our domestic airlines who survive some competition. Remember competition is good. We have none with our airlines. They all just copy Kay one another and send each other execs that land in their golden parachutes.

    That letter isn’t work the shitty paper it’s written on. Sure they beg and plead and promise and in 2 years they’ll find a way to squeeze even more money to the flying public.

    Screw them. All of them including the shot show that is Boeing.

  14. The airlines know that government will bail them to some extent. Hundreds of thousands of “jobs” are involved and the airlines use that as a club to threaten government with. Governments fear large scale new unemployment, executives know this, which is why the letter was phrased as it was.

    Moaning about what the companies “deserve” or fantasizing about dumping them into the bankruptcy process with no government money are pointless. What’ll actually happen is big bailouts followed later by consolidation and big bankruptcies. Naturally executives will suffer the least of all stakeholders. That’s what will happen, no matter how much some think it shouldn’t.

  15. @Rob

    Finally somebody who understands finance. But it’s also true buybacks are the executives’ way of cashing out.
    But to put into context, no company on their right minds will save money for Armageddon. They use the money to improve business or return to stakeholders.
    Where do you tell airlines like DL, AS, WN to spend cash?
    Buy new planes? Improve service? Expand routes? Pay employees bonus? Pay dividends? Pay down debt? Invest in other business?
    Yes to all.
    It’s not fair to blame those guys entirely about stock buybacks. These airlines didn’t spend a big chunk of cash for buybacks either.

    Now if you look at AA, UA and where they spent cash would paint a whole different picture.
    Dividends? AA 2015 UA Never
    Buybacks? AA ‘negative’ FCF UA 80% FCF.

    Again, those that don’t deserve it are AA UA (maybe DL) but not AS or WN.

  16. it interesting to see how bad the us airline industry is prepared. Lufthansa for example didn’t use their money to buy back stocks. and: we have instruments in Germany like short-work money. that means that the goverment pay 67% of the net income of the workers for the next month.
    the company can put an amount on top but they don’t need to.

    why does the government do this. very easy: we won’t loose the jobs and the taxpayers. Its a win win and that is social capitalism as we use it in Germany.

    I hope they do the same in the states. In this situation they should help the industry to help themselves as they did by the banks in 2008.

  17. @Shawn

    Remember competition is good. We have none with our airlines.

    I remember competition, do you?
    Yes we did, we had lots of competition right after the deregulation. Most didn’t survive, the industry is hard. We now only have the big 3 legacy left. No other foreign carriers are dumb enough to throw away money into our domestic airspace. Hey even governments are not that dumb to nationalize it. That would be wasting even more tax payers money on an even worse service. I don’t see Bernie taking the Greyhound like Greta taking the boat yet.
    And yes leaving tip is a messed up system. Just add it to the total bill.

  18. @ Ben — The airline workers should unfortunately be furloughed. That is what you do with employees for whom you have no work. They file for unemployment, and the companies borrow money. There should not be handouts to everyone. Life is not filled with guarantees.

  19. @eskimo – yep sure do and also remember a much more enjoyable experience. No one is arguing the industry is hard but that is not an existing for continued ineptitude in the csuite because they know the gov tit is always right next door if needed.

    I completely disagree with you on foreign airlines wouldn’t want our domestic space but we can agree to disagree.

  20. Just cancelled a Delta refundable rt ticket to Europe and am now wondering whether or not their current $50 million daily burn rate includes refunding refundable tickets to their customers. My guess… probably not. I am OK with it so long as they don’t receive any federal assistance and are left to fend for themselves just like many other industries will have done when it is all said and done. Government picking winners and losers, like what was done back in 2008, is just wrong in my humble opinion.

  21. Let us not forget that the US government basically shut down most of the US airlines international flying, AA for example had to cut 75% of international flying at the request of the federal government. Yes AA bought back stock while they should have put it towards the debt but none the less, they should be compensated for not flying routes they were told not to.

  22. @Shawn

    Virgin tried it at 25%, the most allowed legally. Do you still see Virgin America flying?
    There is a regulation for a reason.
    You probably don’t want foreigners or immigrants to take your jobs. Do you thing foreign carriers won’t do this to American jobs? If they have to deal with all these unions, the business won’t be worth investing in, hence no foreign carriers.

    And just to clear the air, I’m also against government bailout. But some things just don’t work that way. And don’t think the bailout money is yours only, it’s my money too.
    You are blaming people who works for the airline that it’s their mistake to choose to work there so they deserve to lose their jobs?
    Guess what, some people don’t have much choice.
    Guess what, leaving 1M+ people unemployed (factor the indirect jobs too) is not good for the economy either, just go look at @Rob math. Don’t be naive. Look at the big picture.

  23. It’s funny that the folks who read a travel blog have so little empathy. You enjoy your free upgrades, the top offs of cocktails, the cheap fares to Europe, and champagne in the lounge. Now, all of a sudden, an unprecedented black swan event occurs and you refuse to recognize how lucky we’ve all had it. These aren’t just companies – they are a necessary “utility” that drives our economy. Let’s see how Florida looks in 9 months if there aren’t planes to take people there! Yes, there’s been way too much hubris coming from Doug Parker et al but tens of thousands of well paying jobs are at stake. Yes, some guidelines/restrictions should be implemented but I, for one, look forward to the hopefully not-too-distant future when I can hop on a plane, be crammed in row 27, and wake up in Paris or Munich or Vienna. Sure, new airlines could potentially rise from ashes, but any delay will only further hurt our economy. I cannot wait to buy a few tickets and return to the skies as soon as the worlds starts returning to normal

  24. The best way to fix these airlines is to to bail them out – but to let them fail. They are failing because they are in very heavy debt which Goldman Sachs wants payment on (hence the bailout) and the reason they went into debt was because instead of saving profits for a rainy day, they bought back stock so they could get the loans to buy more planes. If we let them fail – and we should- another more experienced, more professional group will buy up the assets and make a go at a better airline that is better managed – hopefully. Yes people will loose jobs but they will be re-emplyed by a new management.

  25. The danger of not bailing them out is far great than the pain of doing it.

    Its not just hundred of thousands of jobs, it also a key economic driver that many jobs depend on.

    A company like Boeing has to continue to produce plains, food service companies have to seve airline meals, airport ground crew, cabs and uber’s that move people, etc etc

    It’s a necessary evil. Just accept it and please dont complain about socialsim, this is how it looks like, and in this case, like it did in 2008, it will save the airlines industry with our money. Sucks in a big way, but the alternative is far worse.

  26. Let this be a lesson to the airlines and everyone. If you think your toughest days were in the past….welcome to today !

  27. I am an airline employee and union shop steward at my location. I cannot emphasize this enough – if Congress does not act this week hundreds of thousands of people are likely to lose their jobs. If you let the airlines fail it will: cause a cascading effect on the economy as airports are a significant part of the economy, result in more mergers or total company shutdowns in an effort to shore up losses, result in much higher airfares and even more draconian travel conditions for the flying public. Things like ‘bigger seats’ are not items that the American public has demonstrated a desire to pay for (people are all for change until the airfare goes up). I understand people’s frustration with the concept of a bailout, but I would humbly ask everyone to look inward and decide if it’s anger really directed at airlines, or if it is really anger about the lack of corporate reform. If its the latter, that is legislation worth pursuing – but not now. For the most part, airline CEOs are lower paid than peers in other industries for Fortune 500 companies. For the most part, airline workers share in the success of those companies with profit sharing bonuses and middle class wages. If airlines fail it will not only hurt us workers, it will cause immense damage to the American public.

  28. I still don’t like the tone of the email. It is blackmailing the Government. Rather, the letter should have mentioned concrete steps already taken by the Airlines and then making a request. For example, “All executives have decided to forego bonuses for 2020 and forego pay with immediate effect. We request…” You can’t be asking for grants saying if you give us X, we will do Y.

    If the Government is doling out a, “Payroll Protection Grant,” it should be for every effected American worker regardless of industry. There is no reason one industry should be benefited over the other.

  29. If they hand this out they really need to hand out things to everyone to be fair. Every employee is dealing with this right now, with the potential of being let go (if not already) and lose all of their income. Just because the airlines have much better lobbying power doesn’t mean their employees are entitled more.
    However that is the sad truth here in the US, it is never about being fair, it is about how has the money to drive the votes.

  30. The government should require EU/Canadian style passenger rights and that the top 10 executives shall be limited to making no more than $1 million in total compensation per year for the next 5 years.

  31. Nice. Now all they need to do is issue a ton of shares at $0 to the government (meaning us taxpayers), massively diluting their existing shareholders (e.g., their fat-cat execs), in exchange for those goodies. And also pledge a boatload more shares as security for the loans. Then we’re cooking.

  32. Most the jobs are gone.

    No way the airlines recover by Sept 1. I am not against the airlines, but layoff the employees not needed. That is why we have unemployment. And it will certainly be extended.

    Giving them $30 billion just extends the inevitable. The money will be better spent elsewhere.

    Most likely, one or two of these airlines just goes away. It sucks. For everyone.

  33. @Chiguy1979
    I have empathy for good airlines. There are plenty of them elsewhere in the world. Alaska, Southwest and maybe Delta does deserve help as well.

    On the other hand, AA and United had this coming to them. Greedy and out of touch executives (who claims that AA will never lose money again, which means he’s terrible at assessing future risks to the business he’s running), employees who feel nothing but contempt for their customers (look at how defensive FAs get on this blog), and now the hypocrisy of asking for government money.

  34. @rob has the best analysis. As for rainy day funds, how many of us tuck away 5 or 10 percent of our after tax earnings month after month? And, sure, just let them all fail because you hate baggage fees, seat assignment fees, nonrefundable tickets, ticket change fees, no free wifi, constantly changing frequent flier rewards, CEO comp. Brilliant POV. And you think some more responsiblePhoenix airline will arise from the wreckage? Dream on.

  35. Isn’t it refreshing to read the condescending comments from the *financing experts* who claim that the average Joe or Joanne doesn’t understand that stock buybacks are a good and necessary component to the same (unbridled) capitalism which outsourced our American manufacturing sector for a quick buck? These same Wall St geniuses are always there to push a taxpayer-bailed-out economy after rigging a system that sucks all the wealth to the top and comes back later to explain to the general public that we are simply *too dumb* to understand their *heist*. The waste of wealth on these *grifters* posing as businessmen is obvious. Take Boeing CEO Muilenberg.

    Boeing CEO Muilenberg Muilenburg was criticized for failing to recognize safety risks and for allowing the company to cut corners to get the planes to market, which led to the deaths of 346 Americans (could have been you- could have been me). What is the outcome?

    Muilenberg walks away with a little more than $60-62 Million with pension benefits and stocks, etc…. while Boeing in July 2019 said it was giving ALL 346 victims of the crash only $50 million dollars total- how generous! (Hopefully through lawsuits they get a whole lot more- but of course our courts are closed for business now so they can wait, right?). And when Wall St is criticized for such malaise? They claim that sensible Americans *want to punish success*.

    In the case of stock buybacks, that money instead could have gone into an emergency fund for times like these. As for these finance geniuses like Rob in this comment thread?

    What they need is a short conversation on the wrong end of a rope. Without such lying and grifting voices this country would be a safer and more prosperous place for the average American.

    As for this current airline liquidity issue? Hell, the Fed just dumped well over $2-$2.5 trillion in a week into the markets for less than a dead cat bounce. Have the Fed give a million dollars to every man, woman and child over the age of 18 who earns less $1 Mil/Yr. (No CEO’s- no elected officials, etc…they have failed us.) No qualification save Social Security # to be immediately dispensed. Solves stimulation from local to national to global market levels as well as housing & healthcare- even reparations for slavery. People will be able to buy food, pay bills and even purchase a house or pay the current house off. (It’s only numbers in a computer anyway and too many people know it.) Markets will come roaring back and there will be no reason to riot if there is also a free and effective vaccine on the way. At least there will be real stimulation to the economy as The People (as the NEW shareholders) will actually spend that money instead of hoarding it. Let’s write ourselves a check for once.

  36. @Shawn
    I don’t see why you need to be insulting. You could just say you disagree and think we should let them go bankrupt. We could let them all go bankrupt, but it would be much more costly to the taxpayer and the huge number of people employed by the industry. And for what? To punish management’s for their inability to predict a 1 in a hundred year pandemic, just to replace them with all new management’s who also won’t be able to predict a 1 in a hundred year pandemic? I mean, come on, democrats and republicans don’t agree on anything and they agree on this…that’s got to tell you something.

  37. I remember what happened to all the bail out money given to brokerage houses and banks during the GFC. I remember the massive pay offs to executves, the bonuses given.

    I also remember being one of ten million families who lost their homes and everything and did not get one dime from the US government.

    This time around I hope the US government has learned not give these scumbags one dime and support people rather than corporations. The 29B they are asking for only allows them to maybe live another month but certainly it is not a long term solution.

    If the government really wants to make a difference, every dollar the corporations want to suck out of families tax pockets should go finding a vaccine for Covid19 The world will survive just fine without flying around, but without a vaccine, it will be a grim place.

    Besides – I remember the 29″ seat pitch and being yelled at on flights. Let the airlines die and out of the rubble will be a whole new generation of companies that hopefully will have earned a lesson.

  38. I’m an airline worker. 2 kids wife like everyone else. No stock No Buybacks a worker. Condemnation of everyone for the dislike of executives is pretty awesome at a time like this. You will think about us when you want something fast or want your medicines when China or another country which is only accessible by plane is making them all. You need us more than your know !!!!!!!! Remember China and India make 60% of the medical needs that if Americans didn’t have they would die. Now use your wisdom to do some math and calculate the time from Beijing to your house by flipping boat!!! I’m dropping the mic and I’m out.

  39. I think it’s a good step. I’d say the plan should have not ‘promises’ but actual guarantees. As for executive compensation that should be reduced by X% immediately and stay that way for while (not forever, but for the life of the loan perhaps).

    The verbiage is a step in the right direction. Now they just need to firm it up with actual requirements and not promises.

  40. @Francis wrote:
    @rob has the best analysis. As for rainy day funds, how many of us tuck away 5 or 10 percent of our after tax earnings month after month?

    Pretty much all of us in the form of Social Security or other 401K retirement savings- which happen to have just *gone up in Wall St smoke*. The entire country needs a bailout so we may as well give every citizen a bailout instead of the 1% corporate CEO’s who constantly hoard the wealth through such schemes as stock buybacks which only artificially inflated stock prices and OBVIOUSLY made corporations look healthy when they were not (otherwise why would they need the bailout?)

    I’ll repeat: The Fed just dumped well over $2-$2.5 trillion in a week into the markets for less than a dead cat bounce. Have the Fed give a million dollars to every man, woman and child over the age of 18 who earns less $1 Mil/Yr. (No CEO’s- no elected officials, etc…they have failed us.) No qualification save Social Security # to be immediately dispensed.

    This takes care of the employees not only for airlines- but for every employment sector, solving stimulation from local to national to global market levels as well as housing & healthcare- even reparations for slavery. The country gets a *reset*. People will be able to buy food, pay bills and even purchase a house or pay the current house off. (It’s only numbers in a computer anyway and too many people know it.) Markets will come roaring back and there will be no reason to riot if there is also a free and effective vaccine on the way.

    At least there will be real stimulation to the economy as The People (as the NEW shareholders) will actually spend that money instead of hoarding it. Let’s write ourselves a check for once.

  41. So what about us, the customers they’ve screwed over with unnecessary fuel surcharges long after the cost of fuel went down, miserable seats that would cramp sardined, unusable earned airline miles, ridiculous cancellation charges wile fat cats like the incompetent Doug Parker gets richer and richer? How about forcing them to do away with the platinum parachutes these bozos get no matter what they do? And now they’re trying to extort more money from us, the taxpayers?

  42. I would be surprised if there is no bail out for airlines given both dem and repub needs votes to stay in office. No party wants to be the one that got blamed for causing 750,000 job loss. Should airlines get bail out instead of restaurants or other mom and pop shops? Life is unfair and we all know it.

    In addition to what they promised to do, US Airlines needs to add EU air passenger rights, put 9 months of raining day cash away in a form of t-bill (not the best use of money but we are no longer interested anymore future bail outs for airlines), no more dilution of mileage plans for coming ten years plus US3 will need to revert their mileage cost for award tickets back to 2014.

  43. Any money given to the airlines should include consumer protection rules like the EU. It’s crazy to bail airlines out while they continue to treat customers like crap.

  44. What a disgrace. The US government imposed the travel ban and now level 4 travel warning. It should have been clear from the get go that a lot of people will loose their jobs because of this. Why should anyone pay them? They are simply redundant and useless now – it’s a sad truth. Airlines need to finance themselves one way or the other, even if that means getting expensive loans on the private sector or flooding the market with dirt cheap airfare to get cash. I guarantee you they would not waste that newly raised money on employees who sit around all day twiddling their thumbs. Now is the time for airlines like UA and AA to get humbled for screwing over customers, employees and the government for years. It’s the only fair way.

  45. There has to be SOMETHING that pushes the kill switch on broken dysfunctional companies like UA. The airlines are all big companies and can withstand a lot by simply firing a few employees. But it’s absurd that there is apparently nothing that can put some of these behemoths to sleep permanently. I feel like Trump will be forced to give them what they want as he won’t get re-elected if he killed off half the tourism companies.

  46. #nobailout I contacted my congressman’s office for a ‘no’ vote. Airline CEOs are a disgrace for rolling in profits and two weeks later no cash on hand. All service industries employees are in the boat. Yes airlines are a service industry. I can only get on board with this if stock buybacks are prohibited forever and Doug Parker is banned from the industry.

  47. The unemployment system doesn’t have the capacity to handle the millions being added to the unemployed so the loans provide a way of supporting the airlines at the worst point and reducing the load on the unemployment system so it can help those most in need. Airlines are critical to the efficient operation of the US economy, and our recovery will be delayed if all airlines are in turmoil. In addition to the proposals made by the airlines, it would be great to add in more passenger rights as part of the rescue. Capital markets are in turmoil, so it is the most efficient means of dealing with one of the most problematic parts of the economy.

  48. @DM

    Shareholders (e.g., their fat-cat execs),

    Where does this come from?

    Shareholders are hardly fat cats. Most shareholders are people like me, probably not you, who own a few shares as part of a retirement portfolio. Or maybe a mutual fund. Or probably the PENSION FUND of the airline (legacy but still important).

    Dividends are ALWAYS based on the airline’s profit so there is no need to freeze them to $zero – that’s automatic.

    Executive salaries, on the other hand, should be subject to a “reasonable test” from a third party with participation from any lenders ( ie bailout by government). The example of exec salaries during the financial crisis was criminal!

    So don’t attack the foundation of capitalism by unfairly screwing investors, some of whom could be your parents through their pension.

  49. @Rob +1 to your posts, having divdends etc is part of the cost of raising money from the markets anyway, though not all companies appear to have a dividend – United does not but maybe does more buybacks which is similar i guess you could argue.

  50. There are petitions circulating online demanding no bail-outs for airlines- or at least demanding consumer protections as a qualification for any tax-funded relief. This is a chance to really voice the disgust many of us feel at the executive greed, and horrendously poor customer service and overall passenger experience at the US airlines. Call your representatives and let them know how you feel.
    It has been downhill for years with these companies. They don’t call it the “race to the bottom” for nothing. People who read this blog know enough about the far-superior experiences on foreign carriers to know something is seriously wrong with the way US airlines are operating and treating employees and passengers alike.
    These airlines need to be forced to stop being such pigs, which in turn will hopefully make flying on US carriers a better experience again. It is truly awful as it is now- including at the often and over-hyped Delta Airlines.

  51. That’s what unemployment insurance is for! Giving money to a FAILING business does no good except bailing out the INVESTORS (debt payments, not shareholders). LOTS of businesses won’t survive. Mine might be one of them, I will have to lay off ALL my employees off VERY soon, and I SAVED MY CASH!!! If I continue to pay my employees I will loose my home and business in a few months. Where’s my bailout? Where’s my loan?

  52. @Joe American, maybe you shouldn’t so derisively talk about finance people given the massive hole in your plan. $2.5 trillion only would amount to approximately $7,722 per person in the US, assuming 323.73 million Americans get paid (the bottom 99%, which is actually all earning under 515k). So yea, not the solution you thought it was, maybe there’s some merit in understanding how math works.

    As for comparing your 401k to a rainy day fund, they aren’t the same. Your 401k is meant for retirement (something a company can’t do), not emergencies, which is why there is a penalty for withdrawing before retirement age. And there are government and often employer benefits for investing, otherwise people wouldn’t do it.

    But that does give me an idea, maybe companies should be incentivized to hold cash reserves via a similar tax plan to a 401k. The fact is, however, this is an unprecedented occurrence that no company would survive for long. A near complete loss of revenue would force companies in almost every industry out of business, and especially companies with such big capital investments (planes are expensive). As an illustration, United had in Q4 of 2019 $1 billion in employee salaries and other related expenses per month. They also have other expenses (aircraft loan payments, storage payments for unused aircraft, rent, etc) totaling another $500 million. So they’re burning $1.5 billion a month, minimum, making no revenue. I’m not sure what companies would be expected to keep many months worth of that type of money sitting around. And if they did, your 401ks wouldn’t grow as quickly as they do, historically, over time. If UA and others hadn’t bought back stock they would have invested in something else (new planes, better employees, or paying dividends to shareholders), they wouldn’t just keep piles of cash (companies don’t do this, nor does it seem efficient to stock THAT much cash for a once in a century occurrence).

    I’m not pro bailout at all, there needs to be a better solution than just handing over money. But my point is, while airlines could have delayed the inevitable by not buying back stock, they would be screwed in any event give the global situation. Yes they are greedy, yes they took advantage of the last bailouts, but ultimately they could have been the best acting companies in the world and faced with THIS situation they’d be facing serious trouble. And bankruptcy for all of them would mean a long time until airlines could replace them, so massive capacity cuts and increased ticket costs for all of us when things return to normal.

    It’s easy to be angry, it’s harder to think of an actual solution that works best for everyone. And when you say they should go bankrupt, think about who really suffers. Not the executives, who make millions either way and will just get jobs at whatever replaces them. It’s the regular employees, shareholders, and all the customers who want to enjoy flying again.

  53. @mddyka
    Exactly. Dividends and Buybacks are the 2 main ways companies return capital to shareholders. The decision to do it in the form of dividends instead of buybacks usually revolves around what type of investor base they are trying to attract. Some investment funds require a certain dividend yield as a requirement to consider buying a company’s stock.

  54. This also all reminds me of the heated debate in 2008 when the Government “bailed out the banks” with the Troubled Asset Relief Program (TARP). In the final tally, the Taxpayer invested $426 billion in the banking industry and 6 years later, in 2014, closed the books with $441 billion paid back, for a $15 billion profit. The auto bailout was not as successful, and ultimately cost the taxpayer $9.2 billion, but even that bailout was a major score, since it was forecasted to cost the taxpayer $39 to $105 billion in lost tax revenue and unemployment payments if we had allowed auto’s to go under.

  55. Good to remember this bit of economic history. I’d bet any “bailouts” of businesses due to this bad case of the flu will be structured so as not to be pr perceived to be gifts to business.

  56. Compare Munoz to Sorenson at Marriott. Sorenson told his employees that he is not taking a dime in compensation for 2020 and that all executives are taking a 50% pay cut. Munoz should toss his $10 million compensation into the kitty. United also has $4.9 BILLION in cash and s/t investments on hand. Spend that first. When people need gov’t aid, they’re expected to deplete their assets first and hand over their income to the nursing homes. Corporations demanded to be treated as people (Citizens United). Np. Deplete your assets and cut your income. Then we’ll talk.

  57. It is interesting and ironic how folks who were recently free-market, small-government, pay-less-tax capitalists are now advocating for socialism. Maybe they should write in Bernie this November?

  58. This bailout is gonna happen whether we, as the tax payers, want to or not. However, I think this is a good opportunity to pressure Congress to pass some consumer protection laws or regulations similar to EU 261 and/or seat size limitations.


  59. The letter sounds like a threat to government. These airlines kept bringing in billions a quarter out doing the last. What happened to saving like any other business? Ask the stakeholders they cherish over customers and their own employees to help them out.

  60. Let’s be consistent. Capitalism in the good times and the bad times. Let the airlines bail themselves out with the billions of dollars of bag fees and change fees they inflicted on customers over the last several years.

  61. Good on Speaker Pelosi for making sure today it’s not just a no-strings-attached giveaway to Big Business!

  62. So we live in a capitalist society so long as it suites the few and not the many? How the hell does that work? While in college I worked for an airline that is no more as it was merged in the great Hindenburg of CO/UA. I have ZERO pity for the industry that takes and takes and gives nothing back. Apparently, people forgot what the hell really went down with the banks in 2008. The fed dolled out the cash, the banks where suppose to make loans simple enough. News flash not only did the banks not make loans they screwed many customers over even more. Rushed on the repayment of the loans so the clowns at the top could get back to business as usual. The US airline business is full of ass clowns. Executives who make way too much in salary and stock packages. I have no empathy for anyone in a management capacity as they did this one all too themselves. Also who remembers 9/11. By Good ole Bush tossing the payouts from the victim’s compensation fund, you could not bring litigation against the airline directly. Why is it in a country that seems to love its capitalism when it suits, we sure as hell act like a socialist society when the preferable shit hits the fan? Loans for small and medium-sized companies only is where I want my hard-earned tax dollars going right now.

  63. No.

    Simply no. Treat them like any other industry. NO BAILOUT.

    Let them close so new companies can arise. Companies that won’t nickel and dime customers to death, abuse customers, provide sub standard service but “the only service available because we can get away with it”.

  64. @Cait – Arne will get plenty of compensation for 2020 (stock grants, options, etc.), just not a salary (which is only ~5-10% of a typical CEO compensation package).

    Don’t think he is “doing this for free”…

  65. Hy, I am from Romania. Looking to this corporate America for years and cant believe it. As long as Wall Street dictates everything in your country, including politics, don’t be upset for this new bullshit that came. You are talking about billions of dollars but a large part of US population doesn’t afford an emergency health service. You pay thousands and tens of thousand dollars for a simple natural birth, expensive health insurance included, in some states, where in Europe is free or insignificant. Just be thankful that only airlines asked that kind of money for bailout. Maybe others wanted but didn’t have the political power to ask. Just like 2008. All businesses must be the same. Even a small corner store have problems during this period but don’t ask for bailout. All big corporate businesses put upfront the fact that they have a lot of employees with families and they are feeling pitiful for them. Again bullshit. They only feel pitiful for their own profits. Let the ordinary american guy to break his neck working, maybe dying and we will wipe our tears. Why the political power don’t put conditions fot the bailout? Even get a part of actives of those airlines? No… Because this is the American dream. Im simply disgusted. Stay safe, all of you. All the best!

  66. My waiter at a local restaurant, a young guy, is Romanian. Came here because he believed America offered him greater opportunity than Romania with its 57th place ranking in GDP per person. So, yes, we have a lot of problems, but I’ll buy into your rant about the failings of my country only after I learn no Romanian wants to immigrate to the
    United States.

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