President Trump Wants To Buy Years Of Discounted Airline Tickets

Filed Under: Travel

US airlines have just received nearly $50 billion worth of loans and grants through the CARES Act. President Trump has now suggested a new way to provide the major airlines with funding, though I don’t think they’ll be a fan of this concept.

Trump wants to pre-purchase airline tickets

During the signing of a further $484 billion coronavirus relief bill yesterday, President Trump floated an idea to give airlines more funding. As Trump explained:

  • The US government is the biggest customer of US airlines
  • The government could buy several years worth of tickets at a very large discount (maybe 50% off or more)
  • Trump thinks the airlines are going to be fine the way things are now, but he likes this as “an additional incentive”

Trump has a way with words, so here’s the transcript of what he said, because I want to make sure I’m not taking anything out of context, and make sure he’s not being sarcastic:

Likewise, I told Steve we’re the biggest user of the airlines, United States government, and one of the ways we can help the airlines is buy tickets at a very large discount, maybe 50% off or maybe more, and you buy into four or five years worth of tickets and you infuse them with some cash. And in the meantime, we’re flying the people of our country for a fraction of the cost than it would be when the airlines get back. They will get back. So we’re thinking in terms of as additional, because the airlines are all set right down, but as an additional incentive where we buy tickets in advance at a very big discount, which I’ve liked really from the beginning. And we’re not up there. Look, the fact is that the airlines are going to be fine the way it is now, but I like that as an additional help for the airlines. I like it both ways. I like it for us too. We’re the largest user of the airlines. So you buy tickets. I don’t know. This sounds good, right, if we get a good discount?

Is this actually a terrible idea?

Real talk for a second — I actually don’t think this is a terrible option for the government to at least offer airlines as a last resort. The catch is that the messaging here is way off.

From the perspective of airlines:

  • There’s no way they’d take advantage of this unless this was their only option to stay alive
  • Government travel in the future is virtually guaranteed, so they’d be giving up significant future revenue potential, and almost any source of funding would come with interest rates lower than this; this is even more costly than pre-selling miles
  • Airlines have been getting free or very low interest money from the government, so why would they accept this?
  • Trump continued by saying that “we’re going to keep our airlines and all those employees totally intact,” so airlines will no doubt call his bluff and refuse this kind of proposal, recognizing he won’t let them fail

From the perspective of the government and taxpayers, this would be a good option if airlines would accept it:

  • From the government’s perspective, this would be a heck of a deal
  • Those opposed to airline bailouts should be in favor of this, because it will save taxpayers significant amounts of money in the future; if Trump is promising airlines will be kept alive either way, then this would be an amazing deal

Bottom line

The government purchasing airline tickets in bulk at significant discounts would be the worst deal ever for airlines, and the best deal ever for the government.

The problem here is that Trump is talking out of both sides of his mouth. Airlines would only accept this proposal as an absolute last resort if all other options have been exhausted, and if they believed the government would otherwise cut them off.

Trump is saying that airlines will be fine no matter what and that he won’t let them fail, but also says that this could be “additional help” for airlines. I don’t know on what planet airlines would consider accepting payment for virtually guaranteed future revenue at over 50% off to be “help.”

If Trump wants this proposal to be taken seriously, then the messaging to go along with this should be “we’re not going to keep providing airlines with free money,” but rather should be “if airlines want further funding, they’ll have to agree to something like this.”

But then again, what do I know? I’m not the guy behind “The Art Of The Deal,” and don’t have experience running successful airlines, casinos, steak businesses, universities, and pageants.

(Tip of the hat to View from the Wing)

Comments
  1. You have also never been a billionaire, owned a a tower in NYC or ran a successful campaign (and win) to hold the most powerful office the world has ever known, but you know better because you know the “Art of The Travel Mile”

  2. I’m going to go out on a limb here and say, without actual knowledge, that Ben has also never had Daddy give him hundreds of millions of dollars in under-the-table money to keep him afloat when everything he touches turns to poo, gone bankrupt multiple times while shafting his creditors, and been the laughing stock of the whole world. But that’s just a guess.

  3. The government already gets HIGE discounts off airline tickets. as a government traveler now, and as a former person who priced tickets at a few US airlines, I can tell you the government already gets discounts that are huge- often over 50% off- fares. And they do it because of the volume. So this “plan” would just really be giving the airlines more money. Not well thought out, not a good idea, doesnt make any sense when the government already gets contract fares over 50% off.

  4. @Lou, Ben is saying that this would be a good deal for the US gov, but that the airlines probably wouldn’t bite.

  5. The government already has a low cost mechanism to purchase airplane tickets: GSA City Pairs. Through an annual bidding process, the airlines submit bids across city pairs that GSA then evaluates. Federal employees traveling on business are required to fly on the City Pair winning carrier over the course of the FY unless very narrow exceptions are met. Prepaying the airlines for these tickets would cause the government to lose any pricing benefit or leverage in the evaluation process.

  6. Just let the airlines file for bankruptcy. No more lifelines. They will figure this out without it

  7. As one of the reader suggested that govt already gets discounted priced tickets around 50%, so this could be just tactic to bring this into limelight and funnel more money without actually getting discount and can be proved that they still get discount
    Just stunt on existing process to justify more money lending to shut who oppose it and show them that they gets discount by just exposing already in place contracts
    Since nobody is going to ask when those contracts are drafted but all will believe govt got the deal from airlines which was already there in first place

    Just my 2 cents worth of opinion

  8. @ben for someone to purchase a 250 million dollar jet and pay for pilots, flight attendants etc. It is not possible to them not to have less than 1 billion dollars. In addition to his many other homes.

  9. But then again, what do I know? I didn’t write “The Art Of The Deal,” and don’t have experience running successful airlines, casinos, steak businesses, universities, and pageants

    ….and neither does Trump 😉

  10. The sad thing is the winner of the next presidential election is guaranteed to be a white man with dementia. Both show signs of early dementia. Even the lying dog faced pony soldier Biden was asked that and he challenged that person to do push ups, but push ups measure stamina, not mental ability. Trump’s suggestion of internal use of disinfectants shows very bad judgment that people with early dementia have, who become fixated on one aspect (Lysol kills) and forget the overall picture (Lysol or bleach will burn a hole in your stomach and poison you).

    There are many more examples of Biden and Trump having dementia.

  11. So much fun watching the libbies heads explode!

    For a person to continually trash a politician on a ‘travel blog’ only shows their deep hatred and intolerance of others. Be careful, all that hatred & anger will ‘eat you alive’ both physically & mentally, not healthy. So you have to put up with 4 years of Trump, big deal…
    Many of us had to put up with 8 years of Obama. I was not a supporter of Obama nor agreed with his policies – but Obama was still ‘my’ President and I supported & respected him and the office he held.

    We are all very blessed to have ‘Lucky’ and to be able to travel (except at the moment) to amazing places all of over the world. I for one am thankful for both.

    Wishing you all peace & health

  12. This is the same guy who recommended a totally unproven drug (that later turned out to result in higher death rates for coronavirus patients) and injecting household disinfectants, right?

  13. He’s a “billionaire” if you include him inflating the real value of his properties, like the golf resorts:

    Trump Inflating Scottish Golf Resorts’ Value By $165 Million, Per UK Filings

  14. @JoeBoo – Obama was also respectful, consistent, calm, rational, listened to science and reason – that’s what made him a strong president.

    He didn’t incessantly lie, solicit foreign interference in elections, bully everyone who disagrees with him, praise racists, actually filed his taxes, pretend to play scientist/doctor …shall we go on?

    192 days left…enjoy it while it lasts.

  15. Also, how do you define 50% off, when fares vary so constantly and rapidly? If fares go down, the government (taxpayers) would be paying more for tickets than they would get from their regular contracts.

  16. @Xavier

    Trump bought Paul Allen’s old 757, manufactured in 1991, in 2010. The purchase price was rumored to be $100MM, but I find that extremely dubious. Whatever it was, Trump actually insured it for $35MM in 2011. It’s no secret that Trump is a fan of debt. I would assume he borrowed heavily to buy that jet and paid much less than the rumored $100MM. None of that particularly suggests he is a billionaire.

  17. @Lou, isn’t that essentially the same as someone telling Trump, “you’ve never been a doctor, an infectious disease specialist, or an epidemiologist, but you’re the president so you must know that hydroxycloroquine or bleach or UV light works wonders to cure a novel disease?”

  18. @JoeBoo

    I think you might be confusing hatred and anger, which are certainly emotions that contributed to Trump’s election, with embarrassment, disappointment, and concern for the long term impacts of bad leadership.

  19. If we discuss the American President enough, here in the Comments section of OMAAT, I’m sure we’ll eventually resolve the question and the world will thank us.

  20. Reading the responses here just highly to me how vile a large segment of the population is.

    Not being a Trump fan, (or fan of either major political party for that matter), when I read this, my first thought was, huh, that’s an interesting idea, though am not sure how or if it could work, but interesting to think about.

    Then I scroll down and read this utter trash from the Trump-hating public. You people are sick for letting your hatred of a politician turn you into bitter, nasty people. I actually wish you no luck in this situation we find ourselves in currently – because you don’t deserve any.

  21. @ Too Much Flying

    why not focus on the several rational arguments that were made in this thread that show Trumps suggestion just didn’t make any sense.

    He’ll probably tell us today it was just sarcasm or that he doesn’t take any responsibility………..

  22. @John R and John – that might have worked 4 years ago against a polarizing candidate, and the thought that Trump might actually, you know, be an outsider and “drain the swamp” (lololol)…the past 3.5 years have been an abject embarrassment, and it will be reflected on Election Day in November (that is, unless, Republicans do their absolute best to suppress the vote and disenfranchise citizens, which they love to do…)

  23. @UA-NYC,

    An “abject embarrassment” is reading the ramblings of a grown person, who acts like a spoiled, petulant child. Are you five years old?

    Don’t like Trump? Cool, I’m getting tired of his over-the-top carnival barker act too, but all you need to do is vote against him.

    These delusionary rantings about Trump being evil, corrupt, dumb, etc. just make people think you are a nut. Because you are. One of the things I will 100% agree with Trump on is that Trump Delusional Syndrome is real. The people posting above like you prove it.

    And for the record, while George W. Bush and Barack Obama were more “dignified” and “Presidential”, their Presidencies were utter and complete failures as compared to the current guy.

  24. @TMF – I see the Trump Sycophant Syndrome is strong with you!

    It’s funny – the Trump loyals don’t even have a defense for him anymore…because there is no defense. Building off the 8 year bull market Obama Economy? Gone. Building a wall? LOL. So what else ya got? Magic COVID cures? Cool cool.

  25. “almost any source of funding would come with interest rates lower than this”
    ————————————————-
    All due respect, you’re out of your expertise here. First of all, a 50% discount on tickets in year 4 or 5 is equivalent to approximately a 15-19% annual rate. That’s not at all an egregious rate for rescue/bridge/mezzanine financing–especially if it’s totally unsecured like airline tickets are. There is no way that airlines could do better than that at a market rate in this environment. And in most cases, that mid-twenties market interest rate would come with a huge slug of equity as well. The market IRR on a deal like this (debt + equity) would be modeled at at least 50% annually except for the fact that investors have now seen that the government will likely bail out any airline that starts to fail. I’d suspect, however, that any further bail outs of the airlines will wipe out the existing equity holders and might start to go after union/compensation benefits as well.

  26. “But then again, what do I know? I didn’t write “The Art Of The Deal,” and don’t have experience running successful airlines, casinos, steak businesses, universities, and pageants.”

    To be fair, neither does Trump. Plenty of experience with unsuccessful versions, though.

  27. @John – you know in your heart of hearts he’s done, no matter how much public bravado you may show…enjoy the 192 days left til the competent adults take back over

  28. Could someone please offer a translation of the transcript into English from Gobble-di-gook.

    Or is he as stupid as he tries to appear (difficult to really be that stupid?) When you try to decipher what he actually says it’s nigh on impossible to be 100% sure what he has said. He often ends with, “I don’t know” which means “Just a suggestion”, not an admission of moronship.

    How the US regains its worldwide respect after this 4 year charade is problematic.

  29. The very stable genius appears to be unaware of this old saying:

    “If people think you are a moron, it is better to keep quiet than to open your mouth and remove all doubt.”

  30. Yea I am sure that the US tax payers are going to want to fund this! If this is the case than I am going to start a new airline!

  31. This seems easy to game. Everyone bids twice as high on the GSA routes, then says they’re giving the feds a discount of 50% for prepurchase of five years of credit Give Jared and Ivanka and the other first degree relatives free intl J tix. He doesn’t want to save money, he wants to show his base a win.

  32. Hahahahahahaha, very funny epilogue especially because Trump didn’t actually write “The Art of the Deal”. it was Tony Schwartz

  33. Why not let anyone buy a discounted, advance purchase ticket from one place to another with open travel dates, like in the olden days? I think people might be willing to buy tickets in advance for trips they frequently take, like to/from college, visiting relatives, attending sports events, etc. They could have a time limit–like need to be used by one year from date of purchase. Business people who have repetitive trips to the same cities might be interested too. There could be limitations like non-refundable, assigned seats, etc.

  34. Forbes says Trump is a multi-billionaire, and they are not basing it on Trump’s statements.

    In fact, the Forbes estimate is a third of what Trump says he is worth.

    How many here own a 757?

  35. How about the government buying airline future ticket capacity at a discount of 50% and allowing the airlines to buy back 10% chunks of the bought capacity at cost plus 8% AND…. the government stipulating the ticket capacity is preferred investment ahead of all others.
    Oh, and the airlines are NOT allowed to buy back capacity with borrowed funds or if their pension funds are not funded to a realistic level.

    Actually , the airline could do the same deal with their frequent flyers except for the preferred status. There would be quite a few that would roll the dice on such a offer., but the overall funds would be miniscule in the big picture. Make it a minimum buy offer . Who knows?
    It would give the travel bloggers and crazy kids with credit something to chew on.

    The airlines are running out of equity at this point and hard decisions loom if they are to stay in their present configurations and ownership.

    Air Freight could also buy some freighter capacity on the passenger common carriers with the current situation and sell the capacity to the airlines as the quarters and supply chain demand evolves.

    Someone always has a better plan to run and market a airline and someone else is always willing to invest in their plan. That is a fact. No one takes their toys and goes home in the airline game.

    Next will be the airport commissions screaming about the cost of current infrastructure and the plans for capacity that resulted in building and rehabs. That will be a ugly situation with Amtrak and the postal service and the DOT reviewing secondary and rural service.

    Change is on the way in the global public transport sector and it will get bloody.

    You might be the last of the credit card point flyers for a long time. Everything has it’s time.

  36. I thought watching him speak on tv was painful but reading his quote makes my eyes bleed. He has to be proof Rick Singer wasn’t the first in the college admission business.

  37. What we do know, he’s the worst thing to EVER have happened to the US -good luck
    and a “billionaire “ pffffft

  38. @UA-NYC:

    So Forbes says he is worth $4.1-Billion. That good enough for you?

    I SAID in my response that Trump inflated his net worth. He’s a buffoon–that’s what he does.

    But he’s still a billionaire.

  39. Oh. Someone’s thinking of taking a page from Carl Icahn’s playbook. You remember, the one that killed Eastern.

  40. Well, as some people here have said ,Trump is a billionaire , so of course he is an expert in everything…I am sure he agrees too. He knows more about everything than just about anybody. I think he read some books, or at least somebody read them to him, so he knows stuff, that’s for sure. And he is a medical genius…he finds cures and stuff even before the so called “experts” do. This is what billionaires do….probably good at brain surgery too. Especially 50% discounted surgery.

  41. Others here questioned whether Trump was in fact a billionaire. He is.

    Is he as smart as he thinks he is? Nope. But he was smart enough to become President.

    But haters are just going to hate.

  42. So many comments on both sides ignoring facts to support their thesis.

    It doesn’t have to be all or none.

    Since he does like to brag why wouldn’t he show everyone his taxes? Probaby because his income is lower and fed taxes paid negligable) due in part to the real estate industry acctg) and his charitable giving is minuscule. But would be interesting to see.

    Assets minus liabilities equal net worth.

    The prices paid for some of his assets are shockingly high. The Mar a Lago purchase was a great one, many more recent were honestly terrible.

    Why would he do the Trump Univ, or the Foundation, or the Iowa debate/veterans “donation” thing?

    What is a 30yr old 757 worth? Ask Delta they might be interested in a bid.

    Could go on and on.

    But please be respectful, look at the facts (both “sides”) and understand there are negatives and positives for everyone.

    We are basically in a depression and in a pandemic with no end in sight for a while.

    We need to come together, protect and support each other, and overcome our challenges.

    Now is a time to through away petty allegences and support Americans and all humans. Because we rely on each other now and always.

    A Dem supporter picks a crop and a Trump supporter trucks it to a grocery store staffed by mostly Dem supporters. Everyone is valued. Let’s push politics aside and support each other.

    We’ll have our time to be counted in Nov. In the meantime to argue when everyone has already made up their mind is a waste of time. Let’s find solutions like state and local leaders and most Federal leaders are trying to do. That can make a difference.

    Wherever you all are on the political spectrum I wish you and your family to be safe, stay safe and stay or find financial stability. And to be at peace and find happiness and contentment.

  43. @1KBrad

    He wasn’t smart enough to become President. Rather he was successful enough to become President.

  44. This is the man who recommended injecting yourself with disinfectant as a supposed cure for a virus. Take everything he says with at least a pinch of salt

  45. @Linda UA already has a prepaid program that provides discounts or fixed zone fares and amenities (higher Premier status up to GS, club access, etc). AA has a prepaid cents per mile program with status and club access for members. So there is a model that’s already been in place at both airlines for over 25 years. Would be easy to customize for larger investments.

  46. Hahhahahhahhaha….

    This is a blessing from Manna…..pre sell the tickets….collect all the money from Uncle Sam….why 3 years…..lets push to 12 years

    Divide the loot with all the C level crooks (bonus rings a bell???… for making deal of the century)

    Hehhehhehehheheh

    Declare bankruptcy……voila……all commitments are tossed into garbage

    Start version 2…

    How to screw tax payers….le(g)ally!!!!

    Go Delta/American/United

    Time to turn your attention to Uncle Sam instead of cheapo flyers………

  47. Lucky, loved your article. As a former airline employee I agree with everything you said, except you made one crucial error. In your last line you left out the word “failed” in front of airline. Not sure Trump is qualified to talk about the reinvigoration of the airline business.

  48. With trumps business “track record”, and history of “personal bailouts”, I would sprint in opposite direction of any of his business suggestions

  49. Trump just says whatever pops into his head and isn’t serious about this. He wants the soundbite and nothing more. Honestly though we shouldn’t just bailout the airlines. There should be significant concessions made by the airlines that will benefit the taxpayers before we start handing out money. Unfortunately with the current administration I think this will be a wasted opportunity.

  50. I’d love to see Airlines sell travel passes again… Anyone else remember with AA sold First class for life for a fixed fee? I’d be all over that if United, AA, Delta brought that back again…

  51. The world would appreciate it if Trump ceased thinking out aloud. Especially on topics he knows nothing about (virtually everything).

  52. Trump once said the value of his businesses depended on what mood he was in on the day he was asked!

    He has a history of over valuing his assets when it comes to wanting bank loans But under valuing them when it comes to assessments for property taxes then wonders why the roads to them are in bad shape because local governments don’t have the revenue to fix the roads because he’s stiffed them on the taxes they need.

    He’s one of the few people to lose money owing a casino.

    Now is the prepay idea a good one? On the face of it yes but actually likely not.

    What he should have said was “airlines here’s your $$$$ which are all loans but we’ll deduct all future federal government flights from the amount you owe based on current contract prices”

  53. The Governments are I think, legally obliged to make sure all businesses that are failing because it is the very policies they have adopted that are causing these failures . The alternative that any Government could have chosen, was to treat the spread of the virus as they do with the flu, but insist on social distancing and banning large groups of people simply to slow the spread of the virus to ensure that the health system did not collapse…choosing isolation would be an individual option that would be legally accepted, and based on risk. This is the Swedish model. It is a compromise between supporting the hospitals and the economy at the same time. The toughest part is getting the balance right, but it allows individual choice. It assumes that the virus is now here to stay, and that the death rate stays the same (.05%) but over a longer time frame.

  54. Is it a good idea or not, Its something Trump has put out? I can,t believe how sad some of you folks are?? You was asked to Comment on the idea,and a few good comments came along, with the usual terrible, yes terrible comments about him. Whilst I understand that most of thses people commenting, are worldly travelers, who of course could be in charge of the USA a lot better, than PresTrump. Myself he is doing as best he can in the most difficult situation, In fact one part of the country is saying stay in in no Trave, and another saying , lets keep working, ? everyone has the answer, Now back to the question,Its an idea, maybe sell , or buy some, especially as they are refundable , at the moment, thx Gerty, in any event all pls keep safe as I really hope to see you all alive a a trip in the not to far distance,plus i love the blog page,

  55. Bear Stearns did this with a huge pre-purchase of AAirPass miles in th 90’s.

    All travelling employees got an AAirPass which was nice from a check in and upgrades perspective.

  56. I have to laugh… this is already in place decades ago I believe in the Fly America Act of 1974 (https://en.wikipedia.org/wiki/Fly_America_Act). Trump is trying to re-invent the wheel, rebrand it to his image, and finally to spin up a positive image for his failed attempt running Trump Shuttle.

    The gov’t has negotiated rates between city pairs for US based carriers. It’s mostly applicable to foreign travel to shuttle gov’t employees from the USA to and from their posts abroad. These rates are often booked in Y- buckets on short notice, but priced out at a discounted fare. So, the gov’t employees have the most flexible rule busting ticket at the price of an average discounted price without having the advance purchase restrictions.

  57. This has been done and already in place. Trump is trying to re-invent the wheel and claim it as his own… all this, while trying to cover his failed attempt running Trump Shuttle services. Read up on the Fly America Act of 1973 (https://en.wikipedia.org/wiki/Fly_America_Act).

    Basically, it applies more to gov’t employees who work abroad. And similar rules for domestic travel as well. It allows gov’t employees book Y- buckets and pay highly discounted rates. The price is somewhat closer to the bottom quarter of the discounted advance purchase ticket prices but at an unrestricted Y-fare rules.

  58. @too much flying

    wow I can’t believe your response. I wonder if you would mind a question? Would you please expand on your view comparing the administrations of GW Bush and Barack Obama to that of Donald Trump? In terms of what constitutes successes and failures?

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