We are now less than two months away from key CARES Act provisions expiring at the end of September, and that means there will be massive changes to the airline industry overnight starting October 1. As we creep closer, calls to extend CARES Act funding have grown louder. Those calls should be ignored. It’s time for airlines to make the necessary, painful changes for long term survival, even though it means a whole lot of people will be out of a job. A lot of you work for airlines, and I’m fully aware that you aren’t going to like this post, but there is a better way to handle this.
In mid-March — when COVID-19 had the US economy instantly unraveling — CARES Act support of the airline industry sounded like a decent idea in theory. After all, we had the president claiming it was a minor flu, and the idea that it would be gone just as quickly as it arrived had not yet been completely dismissed.
The dream of a V-shaped recovery meant this idea had good rationale. Since the airline industry plays an important role in keeping the economy moving, a bridge over that “V” would allow for a quicker recovery for the entire economy. The money would keep the airlines fully-staffed and in a place where they’d be ready to bounce back quickly sometime before October 1. And just in case the airlines didn’t understand this, the government put restrictions that said no layoffs could happen until that date anyway.
If we had experienced a V-shaped recovery, there wouldn’t be much to talk about. But since that time, the situation has changed. Most of the world now understands that COVID-19 isn’t going away any time soon. It is highly infectious, and a lot of people are dying. Some may downplay the impact of this virus, but it is utterly devastating to the families of the 150,000+ Americans who have died… and also to the economy on the whole.
From an airline perspective, we are on the third leg of what we can now only hope is a W-shaped recovery. When that begins to turn up again is anyone’s guess, but it’s clear that we are going to be stuck with depressed demand for some time. Within the US, things may loosen up if we ever figure out how to put a mask on properly and cases drop. But outside the US, there will be lingering concern about allowing visitors from countries who mismanaged the virus for a very long time. The US is at the top of that list.
Even when the doors open, travelers will be very hesitant to return. We saw that in the second leg of the “W” when only a small chunk of travel returned before the recovery froze. And international travel remains flat-lined. By next summer, I would hope that there will be broad ability to travel internationally again, but it won’t be in the same numbers. American has already said its long-haul schedule will be down at least 25 percent next summer. It describes that as conservative, but I’d call it wishful thinking. IATA says traffic now won’t return to 2019 levels until 2024.
With that background, the original CARES Act plan begins to make little sense, but you wouldn’t know that if you listened to the unions. This isn’t a criticism. It’s their job to protect the jobs of their members, so this is exactly what they should be doing. But when the Air Line Pilots Association (ALPA) says that the CARES Act should be extended to “ensure the stability of the airline industry and a robust rebound to passenger travel,” it now rings hollow. The chances of seeing a “robust” recovery any time soon continue to drop daily. Airlines need to prepare for that fact.
The CARES Act has kept airline employees in their jobs, and it has maintained service to every airport from every airline with few exceptions. Now that we know that this drop in demand won’t end soon, it’s time to step back and rethink how this should go.
The CARES Act’s Payroll Support Program set aside $25 billion for passenger airlines to pay their employees for six months. In January of this year, there were 452,933 full-time equivalent employees. That comes out to $110,000 per employee on an annualized basis. That is a lot of money.
Of course, we can argue that the government will get some of this money back if the warrants given in exchange amount to anything valuable, but regardless, it seems safe to say that this is more money than should be spent to keep the airlines fully employed when full employment won’t be necessary for a long time. It just becomes a jobs program, and not a great one at that.
The airlines are walking zombies now. They’re flying more flights than they need with far more employees as well. That’s why as we approach October 1, you see staggering numbers. United, for example, sent out WARN Act notices to 36,000 employees saying they could be furloughed. The number won’t likely reach that high in reality, but it will still be a large number if there aren’t more volunteers.
These are changes that are necessary, and I hate having to say that. It will mean a lot of people will be out of work. I believe in a social safety net, but I don’t think airline employees should have that net paying them to work in jobs that aren’t needed. That’s why this money would be put to better use funding extra unemployment coverage. That way, those who are most in need and don’t make a lot will be taken care of. And those who make a ton will have to settle for less while we all work through the pain.
Yes, some cities will lose airlines for the time being, and everyone will see reduced frequency. But the airlines need to come to terms with the new normal, and they can’t do that until they can shrink to a more reasonable size. More government aid may be good for employees, but it won’t help the airline industry make the necessary changes to prepare for the future. The government should take care of the employees through unemployment insurance, universal basic income, or some other broader program. Then the airlines can begin the hard task of preparing for a different future.
All of our airlines will become Alitalia. Can’t wait.
Keep propping up the airlines. Soon all of the zombies will become Alitalia. Can’t wait.
I think a reasonable policy (sort of a compromise) would be to taper down funding over a few months rather than have it end abruptly as the current CARES act expiry is set to. An additional 5-10 billion dollars through the end of the year with the condition that “no more than X% of staff laid off per month” and maybe some relaxed guidelines for minimum service levels would give both the airlines and employees more time to adjust to new economics while helping reduce service disruptions, possible labor disputes, and possible bankruptcy in the immediate future.
Airlines still have their excise tax exemption through the end of the year.
Airlines will have some hard cuts to make come October 1, but most other industries have had to deal with it, the airlines can as well.
This is the correct take.
This. The reason why the CARES act was required in the first place is that the United States lacks a robust federal social safety net. The only way to get money in the hands of the employees was through the CARES act. The CARES act props up shareholders at the expense of employees (recall how Kirby wanted to institute pay cuts, etc).
While it will be a shame to see airlines declare bankruptcy (looking at you, AA), we should not focus on protecting shareholders. We need to focus on the employees. And I say this as a staunch capitalist. Let the indivisible hand do its thing and I’m sure we will all enjoy flying Moxy, LUV and B6 in a few years.
I feel for the airline employees. But why protect their jobs while many others who are NOT in “Too Big To Fail” industries get laid off?
Too Big to Fail is the problem. Herd a great quote some time ago – “If you are too big to fail, then you are too big to exist.”
This is partially correct. The problem is the US provides an anemic level of unemployment benefits to it’s citizens. If the US had a proper social safety net, then the need to do take these types of actions wouldn’t exist.
The problem is many in the US subscribe to the ideas “if you don’t work, you don’t eat” & “the free market knows best.” Those concepts will be seriously tested.
Rereading your comment,, I agree with it.
I work for a major US carrier that is on the verge of laying off 30% of our staff. While a CARES act extension would temporarily save my job and the jobs of my coworkers, at this point it would just kick the furlough date down the road a few more months. As much as it pains me to say it, I agree with no extension. It makes no sense to be subsidizing $100K-300K jobs when other americans are out of work and on the street. Take the bailout $$ and strengthen healthcare, job training, and UI benefits so those furloughed still have income. Then if there is still the political will to do it give the airlines a bailout if they are still struggling (IE: Bankruptcy imminent).
The govt has a legitimate interest in ensuring the airline industry survives, but we know that airlines keep flying in bankruptcy.
The govt shouldn’t worry if airlines go into bankruptcy – they should worry if airlines go beyond bankruptcy into liquidation.
While I agree with the post, many transportation companies in North America, for instance the railroads are suffering. They have also requested a similar type of bailout. And economists will tell you that when one industry suffers a significant decline, the downstream effects on industries that support other industries is equally devastating. The freight railroads have documented this. But I haven’t seen anything of a similar study with the airlines.
Again, the issue is not whether railroads go into bankruptcy – US railroads have been in bankruptcy many times in their history. The govt should seek to prevent, not railroad (or airline) bankruptcy, but railroad (and airline) liquidation.
Can’t do without a railroad industry – but can do without railroad equities.
Cranky, here’s my take: if the public transportation industry gets no bailout from the Federal government (I believe the latest HEALS Act had zero – zero – money for transit), then I don’t believe the commercial aviation should.
Agree with Eastern
I agree. The reasoning is simple – the poor don’t fly, but they do ride transit in numbers beyond the population at large with exceptions in NYC, SF, Philadelphia, DC, Chicago & Boston. These people don’t have economic power so their voices are over all ignored & that’s unfortunate.
Well said Sean. If you notice they also don’t have political power either. Although its likely implied in your comment.. . .
Agree with Eastern. In Northern California where I live the cuts to our local transit agencies are going to be breathtaking and it affects unbelievably more (and far less privileged) people than airlines. They have faced the same 90% drop in revenue with no Federal support insight.
Public transit is more important to low-income and essential workers than the airlines. Transit did receive some money with the CARES act that was unfortunately distributed based on regular yearly federal formula funds that are distributed using complex formulas largely based on an urban areas population not ridership. If transit received robust local and state support the percentage of lost revenue the CARES act covered was a matter of months. In urbanized areas that had little transit and even turn away federal funds because they lack the local money required to match their allocated federal funds on a normal day, the CARES act provided a huge amount of easy to spend Federal money since CARES act funds do not need any local match. For some of these agencies the CARES act will fully cover a year or two of operations.
Another industry that has gotten basically no dedicated Federal bailout money is the intercity and charter bus industry. Greyhound and other Intercity bus operators which provides an essential service to low-income people needing to get between cities and rural areas got nothing from the CARES act.
They did, but as of now transit received what amounts to a one time infusion & they will need a lot more to stay afloat as a viable service.
Exactly. The (privately run, slightly publicly subsidized) company that runs longer-distance commuter buses from my area to Very Big City (and also to the Very Big City airport) 50 miles away shut down in early March, and indefinitely postponed its planned August 2nd restart date. Most of its riders have cars (and drive to the commuter lots to take the buses to Very Big City), and I’d wager that most of them have probably been able to work from home the past 5 months, but I feel for the hundreds of bus company employees that are out of work until the service resumes.
On a broader level and more anecdotally, COVID-19 may be slowing (or even reversing) a trend towards urbanization. Many people with incomes in the upper 20% or 40% in my area preferred to live in the city and be close to work, the cultural amenities, etc etc. As most of those same people can work from home, and can’t take advantage of the amenities that they moved to the city for, they are now buying homes 50+ miles way from the city, with home prices and sales increasing rapidly. Meanwhile, the poor and working class cannot work from home and cannot afford to move from the city (or very close-by suburbs) even if they could. If this trend continues and becomes pretty significant, we’ll see less political desire to fund urban public transit.
Throw me in the agree column. As much as I despise the term “new normal” we don’t yet know what things will look like on the backside of Covid, assuming a vaccine comes or the bug runs its course, but I think most will agree it won’t look anything like 2019 did. Airlines need to shrink down to current realities to balance supply & demand at a profitable level and be prepared to grow into their new reality.
Great article! It’s not the government’s job to pick winners (ex: bailouts for airlines) and losers (ex: no bailouts for railroads). That’s the market’s role — meaning all the people of the world making trillions of decisions every day about what they want and need (ex: “Do I want to fly or drive?”). That’s why central planning (“too big to fail”) doesn’t work and never has — because it’s impossible to accurately predict those trillions of daily choices.
In the long run, government interference always makes things worse. Every time, no exceptions.
And to everyone in the airline industry — even if companies go out of business and liquidate, the assets (planes, hangars, airports, runways, pilots, mechanics, etc.) still exist. New management will be hired to better utilize those same assets, because the old management obviously sucked. This is all very natural and necessary to flush bad actors out of the system. If it’s not allowed to happen the bad actors stay in control and things continue to suck (ex: the US airline industry).
I would welcome Avatar and the 747s.
Exactly this! Finally, someone who understands Free Market Capitalism, not that the US has had it since the latter part of the 1800s, maybe until the very early 1900s. The US has turned fully fascist/crony capitalism, taking money from the citizens and bailing out their friends (campaign contributors and lobbyists).
I use the word Fascism because the US Gov controls private companies through taxation and over-regulation).
Airlines, like any other business should be allowed to fail and be replaced by smaller, more efficient streamlined and better managed companies. They, nor any other company, should be bailed out!
Besides, the Government has no money, only what they take from the people. The Federal debt is approaching $30T, add in State and local debt, plus unfunded liabilities and it shows how insolvent the US is (see debtclock.org). The US has gone from the World’s largest creditor nation, to the largest debtor nation in Earth.
No bailouts with MY money!
A great book that talks about Unions and Job Banks.
One of your best articles I’ve read over the years; even loved your graphic!
Thanks for your thoughtful opinion today. Certainly Air transportation helps moving the economy and provide and engine to the economy, but maintaining the high salaries of every employee in an airline, is detrimental to the low paying employees and the society as a whole. At this point the federal goverment (with all its flaws) should look at the greater good, which is the $600 dollars for every one in America.
A friend who is an exec with a large staffing company would disagree, they have literally thousands of jobs starting at $15 an hour and up but no takers…..$600 a week for sitting home is too good a deal for many folks.
Let’s see what happens now that the first week of no $600 for unemployment starts.
I bet those temp jobs don’t come with insurance, or if they do they’re a horrible mini-med plan that covers nothing. Why would I go out and work and increase my potential to get sick, if I’m not going to have descent health insurance.
who’s staying at home & doing nothing as you put it?
Well there goes the Cranky for President campaign #toohonest
I’m not going to argue the merits of another Cares Act. Instead, I would like to salute Mr. Gary Kelly, the CEO and Board Chairman of Southwest Airlines. Mass furloughs, the economic and human capital harmed, the training costs associated with equipment downgrades and furlough recall events, the psychological and emotional costs of furlough, and so many other “hidden” costs of parking entire fleets, massive write-downs and even write-offs are all facing the Big 3 legacy carriers. So the upcoming drama greatly benefits stable Southwest Airlines in the marketplace. Yet ONLY Mr. Kelly has voiced his support for airline workers. NOTHING from Mr. Bastain, Mr. Parker, or Mr. Kirby.
Yes, unless a safe and efficient vaccine, medical treatment protocol, or some combination of the two is created, even Southwest will eventually require pay and/or benefit concessions. Even then, I believe Southwest will avoid involuntary furloughs. Their Culture is so strong that they will actually strengthen their “Southwest Family” under Mr. Kelly’s direction.
But what is remarkable, and truly laudable, is that Mr. Kelly has stood up for ALL airline employees, all across the industry, even when doing so could very well go against his Company’s best financial interests. Thank you, Mr. Kelly, for your compassion and true Leadership. I can remember when my beloved Delta would have taken the lead in these trying times. Unfortunately, those days are long gone.
Southwest will not get its costs down anywhere near as well as some of the legacy carriers that will furlough given that 3/4 of the employees at Southwest that are leaving the company even temporarily will do so with at least partially paid leaves.
Southwest has the cash to not make some of the tough calls that its peers are doing but you are incredibly incorrect if you think that cutting costs is simply a big 3 legacy vs. low cost carrier argument. NK has sent WARN notices to very large percentages of their workforce even though we heard for months that the low cost and ultra low cost carriers would be the most able to withstand the current environment.
Oh, and since you didn’t bother to mention it, Delta has not sent WARN notices to any non-union employees.
You post is a complete non-sequiter to what I wrote. But live in your alternate reality if it suits your purposes.
I addressed exactly what you wrote – which is that Gary Kelly did not represent all airlines and for you to think he did is solely of your imagination. The vast majority of the WARN notices that US airlines have provided is to American and United but those two are certainly not the only airlines that have issued WARN notices; if this was a legacy carrier issue, then Spirit clearly doesn’t fit the model.
You picked a piece of information out of thin air, did not accurately present it even in its most basic form, added information which is not even accurate in the proper context, and then drew conclusions which no one who is committed to an accurate interpretation of this article and the comments in it could possibly make.
No sir. I simply thanked Gary Kelly for trying to help A LOT of people at EVERY airline. Even he has said there is little to no Senate support, yet he tried anyway. He could have deferred to ALPA (which he doesn’t even have on his property), but he had the decency to make a public stance. Very commendable, even if ill-fated.
except that is not what you said
“But what is remarkable, and truly laudable, is that Mr. Kelly has stood up for ALL airline employees, all across the industry, even when doing so could very well go against his Company’s best financial interests.
“Instead, I would like to salute Mr. Gary Kelly, the CEO and Board Chairman of Southwest Airlines. Mass furloughs, the economic and human capital harmed, the training costs associated with equipment downgrades and furlough recall events, the psychological and emotional costs of furlough, and so many other “hidden” costs of parking entire fleets, massive write-downs and even write-offs are all facing the Big 3 legacy carriers.”
Since WN only operates one fleet type, they aren’t parking entire fleets or any of the associated fleet costs.
WN didn’t operate a single fleet type before covid because they wanted to not have to furlough but because it makes operate sense for them to do so at all times.
And Spirit is furloughing and operates only one fleet type.
As I stated before, you took a single piece of data, did not even quote it accurately, took it out of context, and came to faulty conclusions. Why did you even bother to discuss ALPA if it isn’t even on WN’s property? You do realize ALPA does not represent AA’s pilots either?
You jumped in to the discussion to try to throw dirt and did not come close to making a logical basis for your point.
“So the upcoming drama greatly benefits stable Southwest Airlines in the marketplace.”
I don’t know if the American public cares enough for this to make an immediate difference. Where it WILL matter is that WN employees can focus on operational/service excellence. It’s hard to give 100% when you’re wondering if you’ll have a job tomorrow. Kelly took those “psychological and emotional costs” off his team’s plate.
that part is correct. Any company that can avoid mandatory employee cuts in this environment is at an advantage – but WN had an advantage coming into this.
And Gary Kelly didn’t do anything to speak for or benefit all other airline employees. He did what WN was prepared to do regardless of covid or any other external crisis or none at all which is to run the most profitable, stable company in the history of aviation.
But let’s also not underestimate that WN is paying a high cost for keeping 3/4 of its employees that are taking some sort of separation from the company in some sort of partially paid and/or benefitted position while other carriers that will do a far more messy separation will achieve lower costs faster. WN can afford what it is doing but that doesn’t mean that other carriers won’t achieve their financial goals or that WN will come out of this with any greater (or lesser) advantage relative to what they had before covid.
and specific to Delta (which was alluded to), ALPA and Delta management are still negotiating; it is very possible that Delta could also be in a position to not furlough any pilots.
Well, well, well, Mr. Dunn. Turns out Doug Parker spent last week in DC quietly lobbying in support of his employees for a PSP extension until 03/31/21. Come to find out 15 Republican Senators are onboard with it now. Meanwhile, Ed Bastain is asking his pilots for a 15% pay cut even before knowing how many will accept his buyout offer. NO OTHER CEO has demanded a pay cut from his pilots. No other. Only Delta. But here’s some good news for you: Virgin Atlantic went bust today. Just like AeroMexico. Just like LATAM. And the Australian Government has chosen QANTAS over Virgin Blue. Delta can really pick its partners!!! And now they want their pilots to pick up the tab.
well, well, well. Another user name because the other couldn’t get the basic facts right.
Virgin Atlantic did not go bust.
They filed chapter 15 in the US as part of a SOLVENT reorganization under UK law. You clearly have no clue about which you talk or write.
I won’t even deal with the rest of your comments since your clearly haven’t even gotten one right new user name or not.
Wrong, Mr. Dunn. I’m a long-time lurker. Haven’t posted here in many years. But let’s say I still keep my finger on the industry’s pulse. What drew me out was your cyber-bullying of other posters. Your arrogance. How you seem to intentionally misinterpret others’ posts. Even Mr. Snyder himself has admonished you with the following directive: “Don’t put words in my mouth.” Evidently, you have been banned from other industry-related sites. It’s not hard to see why. In reality, you are more a troll than anything. I much prefer reading FC’s industry analysis and truly appreciate the civility of Desert Ghost and MissTheMasters. You like to play The Smartest Man In The Room, while scornfully addressing others. The problem with that strategy is that you are NOT the smartest man in this room, sir.
let’s cut to the chase
This isn’t a.net or any other web platform.
CF can and will make whatever decision he wants regarding participation on his chat forum.
Unlike a.net, CF welcomes diverse ideas rather than whatever steps on people’s toes.
btw, do you realize that CF and I agree that the airline industry should not get any more aid because it will only slow down the proper restructuring of the industry? if you actually bothered to read the comments, most people on this discussion agree with CF which means they also agree with me on this issue.
What you and the other members of your social media warrior team can’t accept is that I, along with anyone that looks at finances, knows that American Airlines is by far the most fragile airline in the US right now; it wasted tens of billions of dollars of stockholder money for the past 6 years after its emergence from chapter 11 and its merger with USAirways and now wants to live off of taxpayer money to subsidize even more of their strategic failures.
I have been deadly accurate with what I have said will happen with the airline industry including that American Airlines would end up in bankruptcy and that the American/USAirways merger would not work. Even participants on the sites that I do not participate in any more acknowledge that.
Instead of dragging ten years of internet history onto this platform, how about you address the factually incorrect statements you and your partner (or other user name) have made? And how about you and your partner quit trying to drag unrelated issues – which you can’t even accurately present – into discussions?
oh and you might do well to note that lawmakers on both sides of the aisle can’t agree on even the basics of the next bailout which might mean the President will make an executive order which will include just help for the lowest wage-earners and help for those facing eviction. Airline help won’t come if Dems and Reps can’t get their stuff together on the key parts of this package – of which airline relief is a side show.
Airlines have had six months to come up with Plans A B and C. It’s time to let them execute those plans.
The 500,000 or so employees who support airlines aren’t first responders or really even essential workers if you get down to the details. Airlines in general are essential, but at the moment, not every airline or airline worker is essential.
While this article is less data-focused and more of an opinion, I believe you are absolutely right, CF.
The airline industry has been fundamentally altered and each airline has to figure out how to adapt its business plans to the new reality – even if it is not clear what that will be just yet.
The CARES Act prevented a wholesale meltdown of the airline industry and allowed airlines to access capital markets; there are multiple US airlines that can easily raise new capital if they need to.
Further aid to airlines would disrupt the process of reducing employee counts that was a given under CARES or at least make many decisions that airline employees and companies are making unfair.
If a wholesale meltdown of the entire US airline industry is likely into 2021, then there might be reason to come back w/ further aid for airlines – but if a collapse of the US airline industry is likely, other industries and the overall economy is highly at risk.
The best use of taxpayer money right now is medical research for treatments and for vaccines because major breakthroughs in those areas will do more for the airline industry and everything tourism related than direct aid to airlines.
Let’s also remember that the wave of bankruptcies post 9/11 didn’t start for months and in some cases years after 9/11 while other crises like the Gulf War resulted in much earlier bankruptcies in the airline industry. The government has delayed but not eliminated the likelihood of major restructuring through the bankruptcy process that has happened after virtually every major economic crisis that has impacted the airline industry.
Agreed. No need for a taxpayer-financed kicking of the can down the road, which is all that a CARES extension for the airlines would be.
One of your best posts ever!
I believe nearly all of us who read your blog wish the best for the airline industry, and its workers…well, maybe not every airline. or every airline exec. or every worker with whom we’ve dealt, but…!
I believe we all have fairly strong opinions about airline worker unions and airline lobbying groups, like A for A. And, most of us, I believe, are for capitalism and honest free-market competition and against unhinged nationalism, too much socialism, or that the best way to get our economy out of its depths is to start a war, physical or economic.
But, as they say, we are in “unprecedented times,” where we have to learn some crazy things, like how to cancel strategically!
Don’t we have any smart people left in business, governments, and academia to lead us into solving problems in ways other than simply paying people and companies to do nothing, just sitting around, waiting for what may never, ever come again!
We have people and companies who are smart and willing. We can hire them, train them, and pay them. Set up, en masse, some national programs to fix, deal with, and fortify our country’s infrastructure travel and transportation parts–airports, air traffic control, transit systems, highways, railroads, inland waterways, national parks. beaches, mountains, deserts, and on and on–and do what else.
Our Dads and Grandads, Moms and Grandmoms, too, surely not as smart and educated as all of us are(?) seemed able to figure this out. Can’t we?
Hey, Fred Smith. Lead us on. You showed us that Names NEVER last when you make your case. Carry the torch on this pandemic economic situation I’ll do what I can do, but consider the source: I thought your little jet, Memphis hub, Federal Express idea would never work!
“I believe we all have fairly strong opinions about airline worker unions and airline lobbying groups, like A for A. And, most of us, I believe, are for capitalism and honest free-market competition and against unhinged nationalism, too much socialism, or that the best way to get our economy out of its depths is to start a war, physical or economic.”
We don’t have true capitalism in this country, rather it’s crony capitalism where a few insiders make the important decisions. We have in the airline sector four national carriers & one of them is crying out for help. We can see it by the fact that it has asked two other carriers to do some of the legwork for them, but I’m not going to mention it’s name. Besides how much true competition is there really in the airlines right now or in the recent past pre-Covid. An honest look would show far less than one would believe.
You mentioned not having too much socialism, but I would argue the problem we have is we don’t have enough socialism for our society to function especially knowing there’s a pandemic.
“Don’t we have any smart people left in business, governments, and academia to lead us into solving problems in ways other than simply paying people and companies to do nothing, just sitting around, waiting for what may never, ever come again!”
It depends on the field you are referring to. In the field of medicine, yes & research is ever moving forward. In others not so much.
Excellent – good job CF. Thank you! After 40+ years in the business I’d hate to be in the position that so many are in today. Lots of re-training opportunities! Go for it now, before there is a wave of 1,000’s more looking for work & opportunities…
I would agree with you wholeheartedly, if it weren’t for two words not mentioned anywhere in your post: A Vaccine. Widespread vaccination changes the entire picture, and an extension of the CARES act would keep critical infrastructure in place to support a broader economic recovery once the pandemic is over.
There are many reasons why the public won’t be widely vaccinated by next March. But the aim of the vaccination effort in the U.S. is to have 300 million doses by January, 2021. If that happens, and if it’s widely adopted, March could look much different than the world looks in August. The bridge doesn’t have to last forever, but if it carries us through to March, tens of thousands of jobs are saved and an industry is ready to transport people and goods to support a recovery. And if vaccination efforts fail, March is a good time to accept that fact and adjust capacity to demand. Or it’s a good time to adjust capacity to the demand of a post-vaccine world. But it’s a mistake to view August as the new baseline when we have multiple vaccines in Phase III trials. It was a good idea to support the industry with a bridge over the pandemic, and it would be foolish to give up when we are more than half way there.
What’s often overlooked is the impact of COVID-19 on regional airlines. My 2019 prediction of the loss of a regional airline or two was premature, but it’s happening now – with a vengeance. Compass, Trans States Airlines, and Ravn Air are already gone. And ExpressJet looks like it won’t be around much longer. And I may be missing an airline or two.
The regional airlines that survive may be better positioned. As mainline airlines reduce capacity, that also means moving some mainline flights over to regionals.
Great point. I, for one, welcome more regional jets and turboprops, especially Dash 8 / Q400 turboprops, if that means more options for nonstops and flights at different times than we otherwise would have.
With all the craziness around trying to find overhead bin space (at least before COVID knocked out a lot of passenger demand), particularly when flying basic economy, I’m a big fan of gate checking carryon bags (provided they are returned at the gate instead of the baggage claim). I’m also one of the (admittedly somewhat rare) people who really enjoys flying on modern turboprop airliners.
I agree with the cranky’s points in general. Preserving every job would be subsidizing zombie jobs, as you point out. Sadly, many employees should be looking for employment in other industries, though this is easier said than done these days. That said, I’d consider tapering the support. It doesn’t have to go from all to nothing.
Also, the timeline stretches beyond mass vaccination. Companies are finding out that a lot of their travel was unnecessary, or even wasteful. So business travel may not entirely bounce back even after the pandemic.
And therefore airlines will become far more dependent on the leisure traveler witch is a slippery business model. Too add to that commentator Thom Hartmann mentioned on his radio show yesterday an interesting question – will airlines need to remove seats from planes so physical distancing can be achieved. If so, fares will rise in concert & flying will return to being more a luxury service than something for the masses.
As one who takes care of patients in the nursing home setting, there is a major disconnect between the emotional aspect and the on-the-ground reality.
Because of that, travel has unduly suffered and will continue to suffee up until around Nov 4th at which point it will either continue to be driven by fear or have a miraculous turnaround.
60% of the deaths in our county are attributed to long term care residents. Because of the infectious nature of this beast, it spread rapidly and took out many nursing home residents before we could even get a handle on it.
What you cannot say is whether or not many of these residents would have passed away in the next 12 months anyway.
What is projected to happen next in our area is a death rate DECREASE in the population compared to the usual.
Piling on top of this is inaccuate state reporting of double and triple positives on the same person. Some counties are reporting up to 40% overestimate from the state (there is lots of $ involved in Covid)
I have trips booked in August and October and have no hesitation boarding a US jetliner in 2020. With a little common sense and cortesy, travel is ok.
And if I hear one more person accuse the US of ‘mishandling this’ I will yell. An unlnown virus hits and three months later we have vaccines in phase III trials, scads of treatment communications amongst providers and testing out of the wazoo. The biggest misfire was the press attacking some treatment modalities to push an agenda. It cost lives and increased infection rates.
I am hoping that many folks will head out and find a flight to reconnect businesses, families and friends. Best of luck to all the employees and I look forward to seeing you at check in, the gate, and onboard!
And if I hear one more person accuse the US of ‘mishandling this’ I will yell. An unlnown virus hits and three months later we have vaccines in phase III trials, scads of treatment communications amongst providers and testing out of the wazoo.
The US mishandled the pandemic.
Not saying that the US mishandled it, but almost every other country seems to be handling it better…
feel free to look at the ranking of deaths per capita and the US is #10 behind alot of European and a few Latin countries.
And then you have to consider that the US is incentivizing showing deaths as covid by paying more for doctors and hospitals and even incentivized use of ventilators by an extra charge for intubation. Did it occur to you that the reason why there was such a call for ventilators that has fallen off is because thousands of Americans were intubated unnecessarily but for economic reasons – explaining a good chunk of the high death rate in NY, NJ, CT and MA?
#10 for now, but the number of cases are still increasing much more rapidly than any of the 7 European countries in the top 10. And #10 out of 200-something countries is still in the bottom 1% and hardly something to be proud of.
Bottom 5% not 1% sorry. But still not good.
When you are convinced of what you believe, facts and data don’t matter.
Facts and data, not opinions, show that the US death rate is middle of the pack among developed western nations.
Asian countries have lower per capita counts and there could be lessons ALL of the west could learn from countries like S. Korea, Taiwan and Vietnam – all of which have dealt with more frequent infectious diseases.
If you actually looked at math, however, the difference in death rates between the US and many of the countries above the US on the list is far higher – and the case rate in the US is falling. After a month or so of very low cases, Europe and E. Asia is seeing increased cases even with isolation from the world can’t solve the problem.
And it is specifically because case rates are falling in the US that there is hope that travel can reopen because eradication of a disease like covid will never succeed without mass vaccination and it also was never the goal for those in global disease leadership because they know it is impossible to eradicate a disease with the level of contagious activity as covid.
Further, the evidence still overwhelmingly says that this disease is not a mortal threat to the vast majority of people under 60 with none of the handful of comorbidities.
If there is a single factor that puts the US at a disadvantage to most of the rest of the world, it is obesity.
The sooner that people change their goals to what is realistic and be driven by facts and data, the sooner travel recovery will return. And the 40% of obese Americans should personally address their own health risks – with obesity being number 1 – that gives the US lower long-term health outcomes than most other developed countries, covid or not.
If the country wants the airlines to:
start service again as quickly as possible, in a timely manner once travel demand picks up (or expect very high fares)
wants airlines to have funds to invest in people and technology to provide a safe travel experience (i.e. invest in disinfection, temperature screenings and the like)
wants airlines to continue to serve close to as many airports as feasible and maintain reasonable competition
wants to preserve a competitive playing field for American jobs instead of foreign airlines having an advantage
wants to preserve as much competition in the marketplace as possible
wants to keep the industry that keeps other industries thriving (airlines directly supply people to conventions, consultants, foreign visitors (i.e tourism), tourism (hotels, restaurants), cargo provides a lifeline for mail, pharmaceutical, packages, etc)
wants to keep revenue flowing to their local airport authority to continue to provide a good airport experience
Then providing meaningful support to airlines is critical.
Airlines are bleeding cash…many like Delta are making good decisions right now that are not maximizing finances… they are spending a lot of funds of testing employees, fogging planes before every flight, blocking every middle seat, keeping fares as reasonable as possible, putting up plexiglass, cleaning every surface frequently, investing in technology to make travel as touch less as possible etc. If we want airlines to survive, we need to offer them assistance. Just like we did with security after 9/11.
P.S. The average salary for airlines is so high because of the unionized pilots who won’t re-negotiate. The rest of the airlines pay more meager wages.
Why should pilots agree to work for less or any worker in any industry for that matter.
To avoid the airline declaring bankruptcy and then more or less be involuntarily fired or have their wages reduced even more than the voluntary reduction?
Pilots make more money than they are worth. Important job…yes. But they typically work less than 15 days per month, make upwards of $300,000 or more, have better health care and retirement options than every other employee at their own company. Greed.
They take and take when the company does well, and refuse to be flexible when airlines struggle.
I’m not anti-union, but I hate when unions refuse to negotiate.
I agree with the idea that there are better ways to handle the economic impact of the coronavirus than propping up individual sectors, but unfortunately the US generally opposes “socialist” style social safety nets. Developing a whole new unemployment program would be a massive undertaking and considering how long it’s taken just to get the CARES Act and similar style of legislation passed, I don’t think it’s realistic the government would get it done within the time frame needed.
If the government is willing to offer assistance to the airline industry I don’t see that it makes sense to deny it. One in the hand is better than two in the bush, so to speak. The government has proved willing to play ball with the CARES Act style funding once, so that’s the path of the least resistance toward more funding. The ball is in the government’s court if they want to restructure the assistance and create a more effective or efficient program.
I wonder if the disinfection tools they are using have actually helped the lack of spread of other sicknesses besides Covid-19. During long hauls overseas to Asia, I have always come home with some type of cold virus. The use of Airborne on recent trips has reduced the severity and length of these sicknesses, so if the effectiveness of these treatments are helpful, maybe the industry can implement them on all planes, especially long haul flights. I wouldn’t mind a small fee on each flight to cover the cost.
I think you will see fogging of flights – at least international longhaul – be a new standard for airlines, at least those that want to present an image of clean even after the worst of covid 19 is past.
There is a new global awareness of infectious disease and it will take years for people to get it out of their mind. The reason East Asian countries generally have fared better with covid 19 is because they have faced infectious diseases on a fairly regular basis in the modern era. It has largely been a new experience for Europe and the Americas other than Canada which was hit hard by SARS 1.
I would point out that the $25b isn’t just for salaries – it also covers benefits (largely 401k/pensions and medical) and severance packages – so that $110k/employee rate doesn’t go as far as you’d think. Obviously as an employee I’d like the extension, but my employer is one of the ones which (so far) has not put out WARN notices, and we’re hoping they’ve decided the voluntary departures will be enough for now.
There is a weird provision in there that it also covers “leased” employees, which I believe means contractors and consultants (but not independent contractors?) so the employee count might be higher than you have quoted.