Delta Air Lines’ CEO is making some interesting claims about the billions of dollars in taxpayer support that the airline received during the pandemic…
In this post:
Bastian claims taxpayer support wasn’t a bailout
Delta CEO Ed Bastian was interviewed on Squawk Box this morning. Joe Kernen asked Bastian what he described as a “theoretical question.” The gist of it was that taxpayers bailed out the airlines, and Bastian was essentially asked if the airline owed taxpayers anything.
“While it had been, two years ago, classified as a bailout, candidly it wasn’t a bailout. The money that was provided to the airlines were there to hold employees in place for the period of time it took for the vaccines to show up and people to start traveling again.
The airlines actually did not receive any significant amount of windfall back through the taxpayers, though we greatly appreciate the support. Because had we not received that support, we would have been forced to lay off tens and tens of thousands of people, and we’d be in a position today not having the air service that this country needs.”
Delta didn’t “hold employees in place”
Delta seems to have a very narrow view of what constitutes a bailout, or what purpose it serves. Bastian tries to make the claim that this wasn’t a bailout because it was essentially intended to help the public. Specifically, the government support was designed to “hold employees in place” for as long as it took for demand to recover, so that the US would still have widespread air service.
Indeed, airline payroll support was intended to cover payroll costs for the major airlines for an extended period of time. As a condition of accepting this, airlines had to agree not to fire employees. Was the money used to hold employees in place, though? Delta’s change in employee numbers suggests not:
- In February 2020 (right before the pandemic impacted demand in the United States), Delta had 91,416 employees
- In February 2021 (after the pandemic impacted demand in the United States), Delta had 62,588 employees
Why did Delta’s workforce decrease by ~32% during the pandemic? Well, a lot of the money was used to offer employees early retirement packages:
- A condition of accepting government support was that the airline wouldn’t involuntarily lay off people, but the airline could pay people to voluntarily leave the company
- It was in Delta’s best financial interest to get early retirements from senior pilots and flight attendants, since they’re also the highest paid, and they can be replaced by more junior (and lower paid) employees
- Delta had multiple operational meltdowns during the pandemic due to staff shortages (as did most US airlines), precisely because they spent taxpayer funds on encouraging employees to retire early, rather than “holding” them in place
So I’ve gotta disagree with Bastian’s logic here. He claims that the taxpayer money that the airline received wasn’t a bailout, because it was used to keep employees around. Yet the airline spent a lot of money getting employees to retire early, which leads to lower cost employees in the long run.
Delta received billions of dollars in government support, but the airline wants you to know that “candidly it wasn’t a bailout.” It’s claimed that it wasn’t a bailout since the money was used to keep employees on hand for when demand recovered.
But that doesn’t paint the full picture of what happened, as the airline also spent a lot of money to get employees to retire early. That’s also why we saw Delta have several operational issues due to staff shortages as demand started to recover.
What do you make of Bastian’s claim about taxpayer support?