Do US Airlines Deserve A Government Bailout?

Filed Under: Advice

Update: See here for the latest letter from US airlines to Congress.

The New York Times has an opinion piece published today by Tim Wu about why we shouldn’t feel sorry for US airlines. He argues that we should make demands of airlines about how they treat their customers and employees before providing them any sort of assistance.

I wanted to share my take, because I find the argument to be interesting, though I’m not sure there’s a logical solution here.

US airlines haven’t saved for a rainy day, and that’s on them

Wu argues that airlines have spent the past several years making billions of dollars through a series of mergers and customer unfriendly policies. He uses American Airlines as an example:

  • In 2015 the company reported $7.6 billion in profits, and it has earned billions per year in profits ever since
  • American CEO Doug Parker even bragged in 2017 about how he didn’t think the company was ever going to lose money again
  • Between 2014 and 2020, American Airlines has blown through most cash reserves through stock buybacks, which have amounted to more than $15 billion
  • The company has heavily financed new planes, meaning American has more than $30 billion in debt, which is more than five times the company’s current market value
  • They’ve done that in lieu of building up cash reserves, in lieu of settling labor disputes with employees, and in lieu of investing in a better product

American Airlines hasn’t exactly been saving for a rainy day

Should airlines be given conditions for a bailout?

The argument is essentially that taxpayers bailed out US airlines during bankruptcy years ago, and now US airlines are looking for another bailout, all while they’ve largely deteriorated service. We can all agree that having a robust air travel market is essential for our economy.

Wu argues that before any assistance is provided, we must demand that:

  • Airlines cap change fees at $50; the argument is that high change fees are a drag for the economy, since they make travel less flexible
  • Baggage fees be tied to some ratio of costs
  • Airlines stop installing smaller seats
  • Airline ownership structures change, so that the same shareholders no longer have large stakes in several major airlines

I don’t feel sorry for airlines, but…

I 100% agree with the general sentiment above, though I’m not sure there’s any practical way to hold airlines accountable, and I think the proposed solution would do more harm than good.

Airlines are financially irresponsible, and so are most companies

To me it’s mind-boggling so predictable that these huge and profitable companies can’t weather a storm for a few months. Obviously most people didn’t see something like this coming, and in many ways it’s unprecedented. But still, when you’ve been making record profits for years, you’d hope that companies would be saving up for a rainy day.

But that’s not really how big corporations in our country work.

Management is incentivized by stock market gains, and the investors don’t love if a company keeps tens of billions of dollars sitting around. They’d rather something be done with that. Often leaders aren’t incentivized to do what’s fiscally responsible, they’re incentivized to do what maximizes short term stock value.

But isn’t that general sentiment true across so many aspects of our society? Our government struggles to balance budgets (political party aside). Larger corporates are financially irresponsible. Even many Americans making “good” livings are largely living paycheck to paycheck, because they spend what they earn.

In other words, airlines are like most other parts of our society.

Can the government really regulate what’s good for consumers?

My biggest point of disagreement with this argument is that I don’t think the government regulating most aspects of aviation will help in any way. Are there aspects of the airline industry I don’t like? Absolutely.

I’d love to see competition expanded even further long-term, but I think most of these regulations would have the opposite effect.

I’d argue the variety of business models among airlines in the US is actually good for consumers, including those airlines that are largely fee-driven:

  • On one end of the spectrum you have Southwest, which has no change or cancelation fees, and which offers two free checked bags; their fares generally aren’t cheap, though
  • On the other end of the spectrum you have Allegiant, Spirit, Frontier, etc., which have tight seats, charge for everything, and have fares that are sometimes similar to what you’d expect to pay for a bus ticket
  • Right in the middle you have airlines like Delta, which have high change fees and also have high checked bag fees, but it’s a company that’s loved by many, and which fundamentally does what they can to treat consumers right

Airlines with high fees aren’t necessarily a bad thing

My point is, are there things I’d like to see US airlines change? Absolutely. But trying to cap baggage or cancelation fees would only kill the business models of ultra low cost carriers, and they’re unarguably a positive contribution to the US airline industry.

Without high fees and small seats, there is no such thing as Spirit.

I’d like to see regulations that protect consumers from deceptive practices and give them rights in the case of flight delays and cancelations. Personally I don’t want to see airlines regulated so that the market doesn’t allow them to offer a differentiated product, though.

Do airlines deserve aid?

Then there’s the question of whether airlines deserve aid in this situation, or whether they should all just file for bankruptcy and go through that process.

Obviously the airline industry employs hundreds of thousands of people and is a vital part of the economy. Initially the airline industry is being disproportionately impacted by this.

However, with how things are progressing, just about the entire economy is suffering. What about restaurants and other small and large businesses that are being forced to close? They’re doing every bit as bad as airlines.

This raises an overall societal question that I don’t have the answer to — should relief come to individuals before it comes to large corporations? Should it come to small businesses before it goes to big businesses?

Delta was among the first US airline to ask for government aid

Bottom line

This is obviously a disastrous situation for everyone. As this continues to unfold, it’s not just tourism that’s being hit hard, but a vast majority of businesses.

I don’t know the answer of whether airlines should get aid from the government, especially before individuals do. I’d note that at the same time, the hotel industry is asking for even more aid, as is Boeing.

What I do know is that many large corporations aren’t actually financially responsible — the airlines should have been saving up cash reserves for a rainy day, but that’s not something that excites investors, and therefore airline executives have no incentive to do so.

Furthermore, while there are aspects of airline operations I don’t like, I don’t fundamentally think the government should regular change fees, seat size (other than what’s required for safety), etc. To me that only reduces competition, and reduced competition will lead to higher airfare long term.

What do you think — should we feel sorry for airlines? Should the government step in and help? If so, should consumers/taxpayers “demand” anything in return?

  1. Didn’t Delta recently give out 2 months worth of employee salary as a bonus? Hopefully the employees didn’t go out and buy a Mercedes with that…

    I’m not too cool with yet another “gubment handout”.

  2. “I 100% agree with the general sentiment above, though I’m not sure there’s any practical way to hold airlines accountable, and I think the proposed solution would do more harm than good.”

    So Europe just enforces their (slightly more) consumer friendly laws with a “hope and a prayer?” So you couldn’t require changes to the Contract of Carriage as a function of getting approval to operate from the FAA?

    There are literally 100 ways that you could enforce these changes.

  3. There are many people who get employed through the airline supply chain- catering, uber drivers, hotels (think of housekeeping) , cleaning staff in airports. Gate agents, baggage handlers, mechanics, cabin crew..So I am sympathetic to all of them. However on one condition, salary cap for senior management – IT IS A MUST…Why should tax payer pay for 10 Million salary for a CEO who is going to ask for bailout from governments?

  4. Regardless of how consumers feel about the product that an individual airline provides, the airlines will be bailed out because:

    1) Airlines provide a utility. Travel fuels economic growth.
    2) This is a black swan event. Companies do not plan for black swan events for the simple fact that they are impossible to plan – no one knows the probability or the depth of severity that surrounds a black swan event.

  5. The EU are now proposing closing its borders to all non EU residents, EU citizens and medical professionals will be able to come home but apart from essential freight that’s it for 30 days after its debated tomorrow by the EU leaders. Huge bailouts on both sides of the pond or let them go and see what rises from the ashes.

  6. They don’t deserve any aid until they first do secondary issuance of all the stock they bought back. It was absurd that they kept buying and buying as the price went up. Now they should pay for their idiocy.

  7. They need money– sell special preferred 8-10% dividend-paying stock to Gov’t that they can redeem at any time –buffet does this

  8. Only government-owned airlines deserve government aid. These piece of crap airlines have been taking from customers and employees alike for years. Just like last time, they’ll just declare “bankruptcy” and pocket the handout, plus employees’ pensions and then lay them off anyway.

  9. Chapter 11 is a government protection while you reorganize your business. It seems like the government shouldn’t step in until that point. Let airline stock holders take the cut first.

  10. @ Ben — Not yet. They need to borrow money and make cuts to see if they can survive before the government just hands them money. On the other hand, Trump Hotels should be bailed out today.

  11. The only condition to receive any kind of assistance would be a partial nationalisation (proportionate to the bailout), protection of employees’ benefits and pensions, and ALL monies must be used to keep the airline afloat and pay employees. Zero to shareholders and CEOs

  12. Does a global pandemic that’s cratered demand overnight and induced widespread consumer panic really qualify as a rainy day? UAL’s March revenue is down $1.5b year over year, with no commensurate decline in expenses and an increase in refunds/credits/liabilities. This is a totally unprecedented situation which moves far beyond the standard expansionary-contractionary cycle of the US economy.

    Not to mention the US3 alone employ ~300,000 people directly with countless thousands more employed in an impacted industry.

  13. Everyone shares blame here. From an economic system that legally requires corporations to put shareholder profits above all else to mismanagement of the airlines to most consumers treating travel as a commodity and not be willing to pay for a reasonable level of comfort, it’s a broken system. If the demand was there to support more first class or economy+ ticket sales, airlines would provide more options. Instead, people run to the $19 Frontier/Spirit fares, then complain about the service. There is plenty of blame to go around.

  14. Wu is right. When times were bad, they cut things like meals and added oil fees. When times were good…they kept making cuts and raising fees. And instead of saving, they paid themselves massive bonuses.

    Sorry, not sorry.

    Air travel is essential. But none of the individual airlines are.

    We need European-style consumer protections at minimum.

    With the reality of climate change, 1970s style regulation, with slots handed out on a route by route basis might make more sense. We dont need 9 planes taking off from NYC to LAX simultaneously every hour.

  15. But that’s not really how big corporations in our country work.

    Apple almost went bankrupt before Steve Jobs returned as burned by that experience they have over $200 billion cash on hand. AA could have taken the same lesson from it’s actual bankruptcy but it didn’t.

    I’m not sure there’s any practical way to hold airlines accountable,

    Sure there is. If they need a bailout the shareholders need to be wiped out. Or offer bailout cash for 1 share per $1. This would massively dilute existing shareholders. They voted for the board that approved those buybacks. They deserve to get nothing.

  16. Add my name to the list of people who think that not only are government regulations about ESPECIALLY change fees are doable, but also necessary before giving aid. The government is going to have to support the employees that get laid off by AA, they shouldn’t also have to prop up the company itself unless they make serious changes to how they treat customers and employees.

  17. To everyone that is saying that airlines don’t deserve a bailout, be careful what you wish for. We could do much worse than United and Spirit, with a miniscule route network and many non direct routes. The majority of people speaking are most likely in major cities with robust networks and route schedules. All of that could go away instantly.

  18. In Italy we used to say that for big corporations “profits are private and debts are public” – see FIAT, Alitalia, etc..

    You are probably going to discover the same soon 😉

  19. Well should we bail restaurants, small businesses, small corporations and everyone? Why do we the US taxpayers have to pay for bad management from the US airlines? US airlines should be smart and use their profits wisely, instead im sure the CEOs get paid a lot.
    So no, they should not be bailed out and employees should sue the airline for malpractide.

  20. Alonzo – would that be worse? Encouraging people to live, work and travel more locally. Good for communities, good for the environment, good for local identity.

  21. What’s so special about the airlines? COVID-19 is affecting everyone — bars, restaurants, theaters, sporting areas, museums, gyms in New York City have all been ordered to shut down. Their business has gone to 0 in many cases. How can you have a federal bailout for giant airlines and not for individual small businesses? Ultimately we’re not going to bail everyone out because it’s too costly. (There will be tax relief that’s generally applicable but probably not enough to fully offset the lost business, or even close to it, for most businesses.)

    So why are airlines special? Answer: They’re not. I don’t see any positive “externalities” from airlines — if they massively reduce operations, it wouldn’t spread COVID-19 (to the contrary, there’s an argument that air travel is contrary to social distancing, so it’s actually a health risk right now). Nor do airline failures pose any systemic risk to the economy, unlike, say, banks, where there is a huge risk of economic contagion.

    So it’s hard to see any case for government support. The reality is every industry is subject to taxation and regulation. Every industry is facing burdens from COVID-19. So airlines should get whatever tax relief is given to *businesses as a whole*, including all the businesses that have had to close down due to COVID-19 — and nothing more.

    If the result is all the airlines go bankrupt, so what? Their shareholders will get wiped out, some creditors’ claims will be restructured or written down, but ultimately they’ll emerge from bankruptcy and continue to operate. Capitalism only works if private investors both reap the rewards of good investments and suffer the costs of bad ones. The investors should reap the consequences of their decisions. (And I say that as someone who’s invested in airline stocks, albeit as part of a diversified portfolio. Yes, I’d lose some money on airline investments but what’s more important is setting the right incentives for the economy as a whole and not handing cash over to particular industries that are more politically connected than others.)

  22. If it becomes necessary, it should include acceptance of a passenger’s bill of rights, agreement to kill all unbundled fees (including baggage fees and fuel surcharges unrelated to market spikes), limits to reductions in seat pitch, limiting change fees to no more than $x.xx, and anything else we can think of that they’ve been doing to bilk us and obtain insane multi-billion dollar quarterly profits since the last bailout.

  23. I’m very leery of bailing out in these cases. That sets a precedent for future bailouts (which is why I was opposed to them during 2008). I think Chapter 11 would be the more appropriate course of action vs. “here’s some money, and any time something bad happens, we’ve got more”.

    The magic money tree does NOT grow in my back yard (or back pocket) yet somehow everyone seems to think free stuff comes from there.

  24. @John
    I agree overall- airlines should not be given the royal treatment esp as there are so many others – corporations and individuals – who are as if not more deserving. And airlines have nothing to build up good will- in fact quite the opposite.

    But airlines (like banks, hospitals) occupy a unique place in our economy. Without them the economy would crumble. And unlike most markets, where if one player fails, another one can quickly take its place, that’s not the case for airlines. It’s in our interests to keep the AA/DL/UA in the air.

  25. This my response for United Airlines. Since Continental took over, they have been autocratic, and self serving. Time that the the top leadership gets the same service they have provided their employees and customers .

  26. The airlines employ a lot of people and support a lot of other travel industries. It’s not just the shareholders who are hurt, it trickles down. Helping the travel industry, helps a lot of families. The airlines didn’t create the Coronavirus or bring the problem on themselves. At this point, it’s hard to know the long term impact of this crisis on the economy. The only comparison I can draw is with the aftermath of 9/11. There were a lot of people who were so terrorized by the events of that day that they quit flying forever in some cases and for many for several months after. This time, if the blogosphere is any indication, people who are being grounded are very much inclined to get back to flying again, so hopefully this is just a bad year and not a bad trend for the industry. Airlines are very highly leveraged operations and these drastic cancellations are not easy for even the best run company to weather for very long. I would definitely offer them loans and if this crisis continues for more than six months, I’m sure they will need bailouts. Before I’d blame the airlines, I can find a whole lot of others on whom to spread the blame.

  27. Love me some corporate welfare. Should the Feds give NYC and NJ their tax money back for a new Amtrak tunnel? NO! Should the Feds give CA money for high speed rail? NO! Should the Feds give billions to American Airlines?

    “But airlines (like banks, hospitals) occupy a unique place in our economy. Without them the economy would crumble. And unlike most markets, where if one player fails, another one can quickly take its place, that’s not the case for airlines. It’s in our interests to keep the AA/DL/UA in the air.”

    Transportation for the rich it is vital to the economy, if its transportation for the poor we want nothing to do with it.

  28. If we’re going to bail them out every time, we might as well stop pretending and have the government own them. Let’s cut the B$. Plus, flying is not a necessity; it’s a luxury. Doing tourism and visiting people is not a necessity. Nowadays, with the internet, everything can be done remotely, so even business can be accomplished this way. Very few things (if any) really need to be in person, and air travel should be reserved for those and emergencies. All of us on this site like to travel, but if people can’t travel to the Maldives with their entire family and kids or wherever it is that they have in their bucket list, the world is not going to end.

  29. If the airlines are bailed out, so too should be the airline employees laid off and furloughed, along with all the employees furloughed or laid off all the way up and down the supply chain.

    Stop saving corporations at the expense of the people whose labor *built* those corporations.

  30. i think all aid should be tied to removing all restrictions on new competitors including slot restrictions. if they deserve to be bailed out we deserve a truly free market

  31. The government should give them a loan or buy a stake in them to keep them afloat. We need our airlines but we can’t just give them taxpayer money so they can’t spend it on stock buybacks and executive bonuses.

  32. and i agree with you @licky any rule you will put in place will circumvented by the airlines, its just the nature of corps. the only thing we can ask for in return for the free money is a free market and limits on debt they can acquire.

  33. and i agree with you @lucky any rule you will put in place will circumvented by the airlines, its just the nature of corps. the only thing we can ask for in return for the free money is a free market and limits on debt they can acquire.

  34. A few years ago, while they were making their record billions and hoarding stock, American Airlines declared “bankruptcy” so they could cancel all their union contracts and pension agreements and screw over their employees. Now all that stock is tanking.

    Boo hoo.

    No. No. No. Don’t help then at all.

  35. “A near-term 30-day domestic ban would result in a massive cash draw because, per DOT rules, even nonrefundable tickets are refundable to the customer, in cash, within seven business days if the service cannot be
    provided. This would be compounded by a further reduction in cash inflows from sales during April for travel after
    the ban is lifted, since people would be less likely to book during the ban period. Credit markets would also be far
    less likely to lend.
    o As of now, we estimate that a 30-day domestic travel ban would worsen our optimistic scenario by $7B
    and our pessimistic scenario by $10B.”

  36. I agree with commenting commentor. Please explain why air travel is essential for the average American? It’s not. Sure there are use cases but to act like the earth to revolve to see one more day is dependent on air travel is stupid.

    Absolutely not they shouldn’t be bailed out. Actually half of them should be forced to fly BE out of the country to some other god forsaken place. They made their bed let them lie in it.

    And all these who is me people on here who might lose your exec plat because daddy isn’t paying for your tickets anymore. My fiddle plays for you. You all act high and mighty when the times are good. Pay for it now like everyone else.

  37. Airlines should be regulated in such a way that instead of stock buy backs, they should keep a reserve that will hold them out for a year. Today, no one is talking about bailing out banks because we have a strict control of how much they can leverage their book and how much reserve they must keep. Same should be for airlines. They can’t be asking for hand outs every time we have a downturn. CNBC reported that they are asking more than $50 billion in government assistant. If our government give them that, then US3 are required to hold plenty of cash (enough for one year even operating at zero customer) instead of stock buy backs so that we will never have to bail them out again.

  38. Conditions for bailout:

    1. EU-type passenger protection legislation, without any commenting or watering down by carriers. Take it or leave it.

    2. Wipe out current shareholders by issuing secondary stock to the government equal dollar for dollar to the amount of stock buybacks undertaken by each company over the past several years. Gotta be held accountable.

  39. I mean, are we going to forego free Healthcare in order to bail out the airline.

    Sounds like just another kind of socialism… which we’ve already participated in once.

  40. I am a small business owner specializing in International contract manufacturing for USA companies and also the Federal government. During Q-1, our business went to near zero. I am not expecting a dramatic pickup in Q-2. We are tightening our belts and will make it through.

    The only option the Government might offer us is access to an SBA loan which we may need for liquidity. I do view the US airline necessary as necessary to maintain transit for goods and services as well as for national Security as frequent contractors to the DOD but why should airlines get a bailout when my business can only get a low interest loan. Give the airlines loans which must be paid back with interest when to crisis subsides. I am a UAL investor so I have skin in the game but fair is fair.

  41. Obviously I think the airlines will be bailed out in some form, same as the banks were a decade ago. Should they? Of course not. You are correct, in that many incentives public companies face encourage short-term thinking. The only possible reason a company may undertake some strategic planning for, say, a few months of tanking demand, is with the certainty that the alternative is bankruptcy.

    This is the ultimate bail-out: under bankruptcy, debtors become owners and owners are wiped out. From the ashes of failed companies, new ones will grow, having learned the lessons of the dead firms they replace. This is they way capitalism is supposed to work. The alternative is a an economy of zombie firms that drag down economic potential.

  42. 60 Billion bail out for the airline industry makes me sick. Every business should be treated the same no mater what the size. No doubt these are unprecedented times but you lay in the bed you make. Loan guarantees are nothing more than give aways if there is no collateral to back it.
    Share holders must take the beating and prop up the industry. Whatever the industry shares are worth, they should be sold immediately. Desperate times require desparate measures. Sharpen your saw. Airlines! Chapter 11 and restructure

  43. Great piece and I totally agree with your perspective.

    I do think the word ‘deserve’ is a bit loaded in this context. Ultimately the government choice to bail out these firms should be less about accessing if shareholders ‘deserve’ to be rewarded or punished and more about the good of the country. Yes, that risks creating moral hazard – but that’s the choice we have today because the DOJ did such a terrible job blocking mergers up till now.

    With only three major airlines in the country, the loss of even one of them would have a dramatic impact on service availability and competition. That would have knock on effects for thousands of other industries.

    I’m (probably naively) hoping someone competent is doing a cost-benefit analysis of all this.

  44. I will say this again, if the government bails out the airlines, we (taxpayers) get to sit on their board with an equity stake. This is the same thing that would happen if a hedge fund takes over a distressed company.

    1. They have to agree that share buy backs are gone. They only enrich executives and prevent the airline from saving for rainy days. They also prevent investment in the company.
    2. Reform executive pay. No more golden parachutes.
    3. Implement a reserve ratio similar to banks. Every major airline needs to have enough liquidity to operate for 6 months. We have seen that they are living paycheck to paycheck essentially.
    4. We need more competition. Stop giving airlines antitrust protections across the globe. You are creating systemic risk.
    5. Limit airport slots so that one airline can’t control an entire city’s gdp. 35 percent traffic caps for each airport within ten years per airline.

    I guarantee you they will take my deal if we demand if.

  45. They shouldn’t get one red cent. They’ve been rolling around in the billions they’re extorted from their passengers by nickel-and-dining them for every little thing, and outrageous fees for changing flights and checking a bag. Screw em. If they can’t survive on their own, let em fail. No zombies!

  46. The comments on this board go to show how much ill will the airlines have built for themselves over the years. Yes, air travel is important for the economy but airlines are not quite like banks. They can apply for bankruptcy. Equity holders hopefully will be more circumspect and maybe keep management accountable in the future. Bond holders can negotiate their terms. All of these airlines can come out of bankruptcy as in the past. A run on the banks is very different.

    That being said if they are given assistance, they need to be more heavily regulated like the banks.

  47. Senior airline executive compensation is unacceptable. I cringed a few years ago when my friend who is a flight attendant for United took a photo with Oscar Munoz. I told him don’t you know he would hang you out to dry and then golden parachute with tens of millions of dollars ?

  48. People still want to travel. Just look at the crowded Interstates. Airlines are in trouble because of their own lack of flexibility. People are not booking new flights right now because they are forced to be certain of their plans months ahead of time. But if you drive to Disney World and find the park is closed, you can cancel your hotel reservations without penalty and spend your week off somewhere else. If airlines allowed that kind of flexibility, they wouldn’t be in so much trouble right now.

    I say let the airlines go broke and sell out for pennies on the dollar to Southwest. Then we’ll get some of our missing customer service back.

  49. @John

    Apple has a lot of cash on hand not because it’s a reserve, it’s because they DON’T want to PAY TAX on cash brought back to the US and plus they don’t know what to to with all the cash.

    Rather than painting a good guy on Apple, try paint the truth.

    Same goes with the saving for a rainy day. No business would have thought of saving for a 6 month rain. Even individuals don’t. Why do you think the feds cut interests.

    You also know nothing about economics.
    If they need a bailout the shareholders need to be wiped out. This would massively dilute existing shareholders.

    Guess what, if it wasn’t important in the first place the government wouldn’t bail them out. They rescue them because of their importance. You don’t want to force the poison pill on the airlines. No one would win and it would cost even more to the economy.

    I really can’t blame you since no matter what the government does, there will be a large number of people who oppose it, many of them have no idea but just feel it’s wrong. I wish there is a one right answer to solve all these problems, sadly there isn’t.

    Trump could have prepared better but I wouldn’t say CDC did a bad job either.
    Now if Trump is going full throttle, be prepared for a nationwide curfew. People are going to hate it but a full scale quarantine like Wuhan is what it takes to fend of the virus at this point. Stay strong for 14 days and it will all get much better.

    But we all know that’s never going to happen. The virus is a big conspiracy and just another excuse to take our guns away. It’s always about guns and the AR-15. Hiding behind the 2nd amendment will make the virus go away.
    Maybe a showdown NRA vs CDC would be mind boggling? What kills more, guns or flu.

  50. Let them go bankrupt why bail them out. When they make money they keep getting greedier, most importantly why they get the special treatment, what about those restaurants, travel agencies and many other companies gone bankrupt due to corona, is the government going to bail them out also?

  51. I don’t feel bad for airlines, at least not the major carriers. They have had plenty of opportunity to build healthy weather the storm funds. I feel bad about America’s small businesses. If the government is going to spend aid that is where it should focus.

  52. I do not support any bailout using taxpayer money for US airlines. As recent as Feb 21, United raised its checked bag fees…again! Its cancellation policies during the last few weeks are despicable. American Airlines has been no better. Both the airlines have been very profitable and instead of saving for a rainy day, they have spent that money lavishly on themselves (bonuses, insane executive-level payouts, non-strategic expansion, picking fights with other global carriers etc). If you are operating a business, you need to keep reserves for unforeseen circumstances.

    Taxpayer money is NOT your cash reserve. If that is the case, stop being a private airline and become a nationalized airline. Capitalism does not apply only when you are profitable. It applies when you make a loss too.

    No bailout using taxpayer money to US airlines because they have sacrificed Conscience under the guise of Capitalism.

  53. Eskimo,

    It’s interesting that you say that airlines shouldn’t have had to have 6 months of cash on hand. Cyclical businesses do (and should) amass those funds all the time. Do you remember when the Big 3 legacy airlines used to vociferously complain about Southwest’s fuel hedges, because “they shouldn’t have been held to that (prudent) standard”? The airlines haven’t been run like prudent businesses for three decades now. They didn’t suffer enough after 9/11 or in 2008, so they don’t have any institutional memory. There has always been something of a “moral hazard” associated with airlines. Until this latest run, as an industry they had never made a cumulative profit (i.e. the sum of their losses was greater than the sum of their profits).

    I do believe that the airline industry is important for the US’ economic growth, and I agree with you that all bailout money to be accompanied by draconian penalties for airline equity owners and management.

    I have no fu*king clue how you managed to drag this discussion into AR-15s. Try the NRA forums next time.

  54. For the record, AAL was the biggest gainer in the S&P 500 today (a day of declines that we haven’t seen since the crash of ’87)

    Somebody certainly doesn’t think they’re going bankrupt (although somebody might think they’re about to get bailed out by Uncle Sam.)

  55. F the airlines and their CEOs… Every day they treat the average tax paying coach flying customer like cattle with their only concern to cram as many seats into the planes and make the travel experience a miserable, grueling ordeal. Now they want billions in bailout because poor them!

    No handout should be given without strict stipulations that they get their act together and be held accountable to their tax paying bailout sponsors regarding service and fares (make the coach experience better, more reasonable seating and space, more sensible boarding procedures, lower fares etc.) That’s just the start before they even get one cent!

  56. The airlines couldn’t have foreseen this event, how fast it’s moving, and how bad it is. If they all go bankrupt that will be further future disruption at the time when we need them to help refuel commerce.

    That said, if we do bail them out, with our taxpayer dollars, US airlines should be forbidden from charging baggage fees, seat fees, or any other random fee they’ve come up with in the last two decades until the bailout is repaid. Asking us for money just charge us money to pay ourselves back is self defeating.

  57. Maybe not the correct place to post this, nevertheless, heads up for anyone cancelling a delta flight.

    Delta is refunding bookings affected by COVID19 by giving a credit valid for one year. However, important to note that they are not refunding any trip add-ons such as pre-paid baggage, seat assignments, delta one upgrades.

    I have a flight BOS to ORD coming up in five days. Booked economy, delta offered a $79 upgrade shortly after making the booking. Decided to take the offer since I’ll be travelling heavy (moving to Chicago so will have 2 checked bags).

    Disappointed Delta isn’t including trip add ons in their refund policy during this extremely uncertain and difficult time. But yea, let’s bail them out…

  58. So many other industries are hurting (my parents own their own business that works with restaurants, they’re effectively close until who knows when) that it’s not really fair to “bail out” one industry like airlines.

    That said, airlines don’t start up every few months like a mom & pop, and we do have an interest in keeping the industry competitive with options. So, if they want to let airlines apply for massive loans that will eventually be paid back (so often these never do, but if we held to it this time) I think it’d be a good idea to tack on some conditions are mentioned in the article… with the biggest condition being that they really need to pay it back this time. Rates are so low right now, it’s basically “free money” anyway, just make them pay it back.

  59. @AW

    You got me wrong. Cyclical is planned reserve. This is 9/11 type nobody reserves.
    Southwest business decisions also came back to bite them now at $30. I believe UA didn’t hedge at all and DL bought Monroe Energy. Different leadership different risk strategy. I see no reason any airline should treat hedge as a (prudent) standard, if at all.

    And gun policy (NRA, AR-15) is a good example of constitutional rights being used the wrong way too far. USA probably needs a home quarantine lockdown. But don’t expect it to happen due to constitutional rights.

    For the record and as a throwback, Bear Sterns was trading over $60 a day before it collapse. So AAL being a biggest gainer tells nothing about going bankrupt or not.

  60. I think government financial aid should be contingent not only on additional consumer protections, but also on them continuing to pay rank and file employees without laying them off. C-suite folks should, like Ed Bastian did, forego salary for a certain period of time as well. The economy depends on people continuing to have cash in their pockets to pay rent and buy goods and services, and ensuring that people continue to get paid will make sure that money continues flowing through the system and cushions any longer-term blow.

  61. I have very little sympathy for the airlines. If you look at their fare structures, you will see that they are still charging fuel surcharges, even though fuel prices have been reasonably low and are currently in free fall. I agree with the general sentiment that they have screws their customers for many years without any feelings, now they expect us to feel sorry for them…..give me a break!!!!!!

  62. If there were just one airline (remind you of the proposed Medicare for All one system monopoly?), then airline liquidation could be a threat to national security. Not so here. $50 billion is a lot of money. Does Mary’s Wedding Boutique or Cosmetic Dentistry Clinic of Philadelphia or Abdullah the Uber driver get $50,000 in government aid? No, they just suffer. AA and F9 and others should get in the same line as small businesses and individuals who don’t get aide.

  63. It is kind of a typical American capitalist cop-out to say, “Oh we need to give them a bailout and yet not demand a set of standards” (ie – banks, AIG, etc) for the flying American public. Are you really here arguing that JetBlue’s passenger bill of rights is bad for business? If the airlines want even a cent of public assistance to whether this economic storm, the least our incompetent, feckless politicians can do is demand standards as far as seat pitch and size, especially since there are safety implications. The more that people sit here and argue for bailouts for the wealthiest of the wealthy corporations, while the everyday person gets peanuts are truly disturbed. Socializing the losses and privatizing the gains over and over and OVER. Remember there are people sleeping in shelters and out on the streets who are demonized by the same Republican trickle down orthodoxy. It is time for the government to stand up for everyday citizens and stop using our tax dollars for nefarious “future campaign contributions” by the regulated entities, which in turn, become profitable and turn around and screw their consumers in thanks by advertising fares without including customary fees. No thank you, save crony capitalism for the Bush era, it’s a new day when not everyone is a moron, some of us actually read.

  64. Any financial aid given to airlines by taxpayers’ money must be paid back to taxpayers in some shape or form. Travel vouchers are just one example.

    Airlines have been gouging customers by eliminating competition. I fly from Detroit to Dallas and there are times when Delta been charging me $800 for a round trip economy class ticket. By gobbling up Northwest airline, Delta eliminated the competition from the Detroit market. I can go across the Atlantic for that kind of money.

    The idiots in Washington don’t see that. But customers like me must pay for those fares through their nose.

    Airlines shouldn’t be bailed out to continue their game of gouging the customers. They must agree to open skies/competition (domestic & international) and then they should be given aid, if any.

  65. There is no special case/compelling circumstances. They shouldn’t get any bailout money, other than through bankruptcy protections. Those who’ve bought stock had known the risks , as in any other investment. If they go bust, a whole slew of ‘Phoenix’ players will emerge from the ashes.

  66. Whether Ben (or any of you) think airlines “deserve” a bailout isn’t a factor. They will get one and the number being floated is $50 billion. They have good lobbyist and stay very close to congress and the White House (both parties). It will happen while many other businesses shit down and many others are laid off.

    Just a fact

  67. @AC
    They may well end up with a taxpayer funded bailout. But the public view of airlines has changed; they are now well and truly in the toxic basket, alongside banks and insurance companies…certainly no longer a benign and consumer-friendly segment.
    Politicians, even those on the fruitcake right, are well aware of this, and whatever sympathy ( and $$$) there might be for airlines, it’s going to be far below what it might once have been. Intense shareholder pain is inevitable.

  68. HELL NO (they dont)! I’m a big supporter of this administration but if they do this, then he deserves what happens in November. And what about all the other business affected by this, especially the small ones who have very narrow margins.

  69. I like the idea of making the airlines issue preferred stock in order to pay the government back. Also think there should be a minimum size seat and legroom that is larger than generally available now. Current seating is unconscionable unless you fly first or business which Lucky manages to do quite often.

  70. No bailout. It cannot be both ways. Shareholders and execs reap the profits and therefore share the same risk. Airlines love deregulation except when hard times come along. Tell Congress a vote for a bailout is a one ticket home.

  71. It has been proven before when the banks received a bailout for their mistakes. A lot of the big CEO’s left with millions in their pocket, and the laws allowed it. So, NO!!! No bailout money. Get a loan like everyone of us!!!!!

  72. This is really an insurance issue. Should the government insure the airlines and/or others against a pandemic because you can’t buy said coverage on the open market? That’s the question that’s really being asked.

    If this were a recession then that’s their problem and they shouldn’t be bailed out whatsoever. That’s a cyclical business risk that they should be able to handle. The government not allowing them to sell their product or telling people not to buy it, though, crosses a different kind of line.

    I don’t have a great answer but I also don’t think we should expect any business to be prepared for this strange of a situation. Same for 9/11. Recessions? Yes. Things like this? I don’t think it’s reasonable to expect them to be prepared.

    Then again I don’t know how you can bail out everyone and if you can’t bail out everyone you shouldn’t just bail out the big companies. That’s what usually happens and it’s despicable.

  73. I agree with Mr Wu. There has to be quid pro quo if airlines want a bailout. There should be stipulation that bailout be used for employee compensation and blocking of temporary layoffs.
    Some additional regulation is needed since airlines are colluding on many fronts, particularly on air fares. Also, passenger rights need reform since the big carriers don’t operate in an ethical manner.

    If , as Ben argues, we should let competition prevail and hope things get “better” for the travellers, then why not de-regulate domestic transcon flights for international carriers…. this will surely force US domestic carriers to change for the better both on price and quality of service.

    What a world of difference when one travels on international travel.

  74. Consumer protections laws should be attached to any money. Airlines, specifically AA and UA, treat customers like garbage and offer a garbage product.

  75. If they get the bailout then it should be repaid WITH INTEREST like the auto industry bailout in 2008 was. Why should it be free?

  76. Strongly against an unconditional taxpayer funded bailout. If they need the funds, sure – the government must step in and help since this crisis could probably not have been planned. However it should be treated as ‘debt’ and must be tied to conditions of paying back the money (along with interest at the benchmark rate, which is magnitudes cheaper than what they can get anywhere else). Some conditions that could be thought about:
    – A mandatory percentage of profits every year is paid back until the debt is fully paid
    – Capped dividends / bonuses until a good portion (say 70%) of the debt has been repaid back

    In the short term, everyone will feel the pain – investors, employees, executive team, taxpayers. However, in the long run, this should help to build a more efficiently run and stronger company.

  77. @MattR yes there are plenty of blame to go around. Airlines, gov and also us, the consumers! So let the system down and build a new one, it’s a new balance within the capitalism system rather than the Frankenstein now. Everyone learn their lessons, officers, consumers, and shareholders.

  78. Some quantity of relief (aka bailout) on account of decrees from government to stop flying. Sympathetic to that.
    But really good idea: compensation with conditions. Forget seat sizing. How about: make sure compensation is about keeping people employed. Keeping shareholders happy? Nope, they can wear it.

  79. No bail outs! Let the arrogant, disrespectful, self important, vengeful, murdering, thieves they call airline and TSA employees engage in their power trips while in the unemployment line instead of the boarding security line.

  80. How f*cking ridiculous. We have been brainwashed to think large corporations need bailouts more than the millions of waitstaff that just became unemployed due to forced restaurant closures from the corona virus. Legit, what is wrong with us? Why is corporate socialism accepted and public services such as food stamps and disability railed against. Why isn’t there outrage over this suggestion rather than discussion. How stupid are we? Priorities are beyond F’d.

  81. I have to agree with most of the NYT opinion piece and don’t agree with your opinion Lucky. The airlines all came before the regulators and said that their mergers would benefit customers with this and that, but in reality they’ve only made changes that have helped the airlines….higher prices, FTQV programs that have been de-valued because the earn ability has been changed and the burn ability, when even able to find a flight for your de-valued points now cost 2x-3x-4x what they cost just a short time ago. Change fees, bag fees, award ticketing fees, re-deposit fees, reserved seat fees aren’t related to the cost of running the business, they’re just another way to take more money from the wallets of customers on airplanes that don’t even have the basics – like power for your laptop/iPad that you would like to charge to watch TV/Movies on your own device, as on American, they’ve removed seat-back entertainment and seat width and padding. The airlines have gotten so greedy. If they’re going to receive ANY tax-payer bailout, them the consumer should have a say about how some of these fees, services and seats are provided to the traveling public.

  82. FYI, some airlines have saved for a “rainy day” (Delta being one with a cash reserve for something just like this), and all airlines employ thousands of people who would be better off if they were able to keep their jobs by getting government help. Should money go to big businesses before the individual? By doing so thousands of individuals are helped and not made part of a problem by getting laid off.

    It really doesn’t matter at this point what you think of all the airline policies for getting money from the customer. You could probably find things you don’t like about any business. What matters right now is how to mitigate the damage and keep unemployment as low as possible.

  83. I think some people are losing the forest through the trees here, especially when it is so easy to compare airline finances to personal finance. But the situations are completely different. Airline margins are thin even in good times, and cash turnover is extremely high. Take United for example, with $36bn in revenue an EBIT for $4bn and $32bn in operating expenses, UCH only has a market cap of $8bn. This means that a seemingly reasonable, from a personal finance perspective, 3 month rainy day fund would mean holding more cash on your books than your market cap. This is an extremely precarious situation to be in as a company as you could essentially be bought with “your own money”. This creates a huge disincentive for savings in the industry. This is somewhat rare as other companies with this much cash flow tend to have much higher market caps. This is absolutely an economic inefficiency which needs addressed but the unhealthy focus on airline savings belays larger economic pressures as well as ignoring the immediate peril to the global economy.

  84. LET EM SUFFER!! As a retired airline employee for nearly 25 yrs i always told the new kid coming into the airline this: A career in the airlines is like building your home all by yourself, no one helping you. Imagine how long that would take, and then realizing you built your home on an active volcano!

  85. Absolutely no bailout! When times were good and they were making money, did we (taxpayers) get paid a dividend?
    Airlines come and go, we (the traveling public) will not be deprived of air transportation. The market will take care of it (and us) all.

  86. If only we here on the site were actually making the decision on this! Unfortunately we are not! The very same people who made the decisions on the responses to this healthcare crisis will make those decisions! Now if memory serves me correctly, been there, done that before!
    While we learned lessons the only thing US airlines learned is that if they whine and stick there hands out…..! Just wait the bailouts have just begun. There will be little left for the rest of us!
    I would like to see all sorts of strings attached to ANY money they receive! If I sound less than enthusiastic it is because I am not.

  87. No airline bailouts from the government. We don’t need crony capitalism. We need capitalism and healthy markets that will weed out companies that have bad business practices. Don’t reward bad behavior or else you’ll just get more of it.

  88. No bailout for airlines. Almost guaranteed, they will use the taxpayers’ money to buy back shares instead of helping their employees and staffs. Shares buyback only benefit the top management who live off stocks. These top executive already have a lot of money in their bank accounts. They will use the money to buy back shares – continuing the process of enriching themselves, and giving 10% of that money to crooked Republican and Democratic senators, other congresspeople, and Trump campaign.

  89. First, pierce the corporate veil and take the exec’s assets, I say! Absolutely wipe them out as individuals.

  90. They should absolutely not be bailed out. What is this nonsense? If they don’t have a rainy day fund, that’s on them. In the event that they do get a bailout (which they probably will), the government should match whatever the CEO and CFO personally contribute to their company. There has to be some level of accountability for the poor decisions.

  91. I purchased a ticket on delta to Tokyo for this April prior to any knowledge of Coronavirus. Now when I call the airline they say they can give me credit which must be used within one year of my purchase date. Which is by the end of this year and I know I can’t plan another vacation this year. I ask them about a refund and they say unless the flight is cancelled they only do credit. So if I don’t use this credit I lose it.
    So why should we bail them out if they aren’t going to refund consumers if all flights are not cancelled? If they agree to refund every ones flights who wants a refund, then yes I can understand a bail out.

  92. My wife and I have been saving and planning our trip to Bavaria to see the Passion Play for over two years. We finally made our reservations in February before the virus became a pandemic (or any emic). The Passion Play has been rescheduled to 2022, two years from now. But will Delta refund us the money? No. We can get a credit, but the credit is only for one year. Hotels and other venues have refunded all monies, but not the Delta. The response – Sorry. So my response to wanting my tax money. Hell NO!

  93. Airlines increasingly treat us like crap. Flying is miserable. It’s so miserable that it makes people angry, depressed, and sometimes (with the wrong frame of mind) violent.

    It’s a horrible system that is such a disgrace from the way it used to be – so NO, they deserve nothing. Let them fail.

    I am so incredibly sick and tired of how airlines treat us I WANT them to fail! Why should my taxpayer money be used to save their greedy asses?

  94. If the airlines receive a CASH bailout from our taxpayer CASH dollars, then I want to receive a CASH refund of the trip that I have to cancel in May due to a shelter-in-place order. I DO NOT want to receive a voucher. My trip is cancelled, and I am not going to be able to reschedule it for a later time. The airlines should be required to refund any pre-purchased flights with CASH and no change fees if they are going to receive a CASH bailout. A voucher for future travel with a year restriction on it does me no good at this point!!!

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