We are now less than 60 days from the expiration of the government’s Payroll Support Program (PSP) version 2.0, and that means it’s time to start talking about version 3.0. Ok, so that’s not true… airlines have been talking about 3.0 since before 2.0 was even passed. Just like it was during 2.0, version 3.0 will be bad public policy. That money will do far more good by being spent elsewhere.
PSP 2.0 was supposed to be a second bridge for the airlines after PSP 1.0 failed to get them anywhere near the other side of the pandemic. It was going to be a long, dark winter, they said… and they were right. But guess what? The spring isn’t looking so great either, and bridges should not extend this far.
Let’s again do the math here. PSP 2.0 provided up to $16 billion to airlines to fund payroll for the four months between December 1, 2020 and March 31, 2021. Remember, this funds even employees who would have been paid by the airline regardless of whether PSP existed or not. What really should matter is how many jobs this saves.
Since airlines are required to send out WARN notices at least 60 days in advance of a furlough, we have an idea of how many people will lose their jobs when this round expires at the end of March. Here’s a list of what I’ve seen WARNed so far.
- United – 14,000
- American – 13,000
- Hawaiian – 810
- Air Wisconsin – 140
I imagine there may be some small numbers from other airlines to add to the pile, but it won’t be big. Both Southwest and Delta have said previously that they would avoid furloughs, and I don’t imagine that will change. Let that sink in for a second. The government will give billions to Delta and Southwest, and it won’t save a single job. It will, however, massively subsidize the operations of the two airlines that arguably need it the least. It’s no surprise those angry rants againt Middle East airline subsidies have fallen silent. You just can’t argue that with a straight face. But I digress.
Let’s take a worst case scenario and say that 30,000 people will lose their jobs. The extension would most likely be for six months this time around, so let’s call it another $25 billion thrown into the black hole. That’s around $830,000 per job saved. And that is insane.
Less Than 30,000 Jobs Will Be Lost
That worst-case scenario, however, is highly unlikely. To illustrate why, let’s take the case of United. Last July, United WARNed 36,000 employees that they might need to be furloughed on October 1 after PSP 1.0 expired. It then went into an aggressive effort to get volunteers to avoid furloughing. In the end, it furloughed “only” 13,000 people.
Fast forward to PSP 2.0 and United recalled 17,000. How? Well, 4,000 of those were people who took a voluntary furlough. Note, that doesn’t include people who took an early retirement or voluntary separation. They don’t have recall rights.
I spoke with the United team about this, and they didn’t have a number on just how many of those 17,000 would actually accept the recall. After all, some people have taken new jobs, and others may not feel safe coming back to work. There are people who won’t come back, but each workgroup has a different date by which each employee has to decide, so the numbers aren’t final.
United wouldn’t give me an estimate either, but remember they recalled 17,000 people, and now they have WARNed 14,000 that their jobs may be at risk this time around if they can’t get volunteers. That means that a good chunk of the 3,000 person difference is probably due to people not coming back to the airline, though some is also going to be due to the recovery. The problem is, the recovery still looks very weak, so I doubt that’s responsible for much.
The point of this exercise is to show that it’s highly unlikely that we’ll even reach 30,000 jobs lost this time around, and that means the cost per job saved is very likely to increase over that already bloated number by the time all is said and done. How is this even being considered?
Government Shouldn’t Prevent Sacrifice
To be very clear, I understand that this doesn’t mean others won’t sacrifice. There may be wage cuts or reduced hours that will be painful, but that’s unfortunately what happens when your company shows poor financial performance. Everyone has to sacrifice. The country’s priorities should focus on helping people keep their heads above water long enough until they can find a new job or the airlines are able to restore previous pay and hours.
This doesn’t mean I have no sympathy for those who have to sacrifice. I may not work for an airline, but to give you a useful data point, during the last six months of last year, Cranky Concierge revenue was down more than 90 percent. I not only have a great deal of sympathy, but I have plenty of empathy as well. This requires real sacrifice throughout the broader travel industry.
For those who can hold on and continue working for less, that’s good news. For everyone else, that’s exactly why unemployment insurance exists. The federal unemployment benefit could make great use of an extra $25 billion being put into that plan instead of just giving it to airlines to help subsidize wages, many of which are already going to be paid by the airline anyway.
It’s important to remember why PSP exists in the first place; why airlines were singled out to be saved. When this pandemic first started, the goal was to provide a bridge to a quick recovery. Airlines are important to the economy, and everything was going to bounce back very quickly, so the government wanted airlines to be ready to go. Now we know this recovery isn’t coming quickly. Yes, things should improve once there is a widespread vaccine, but nearly everyone agrees that there will be a multi-year impact on demand, especially for the all-important business traveler.
Because of that, airlines need to adjust their businesses, and that means reducing the number of people who work for them. As long as PSP continues, airlines won’t make those hard adjustments. Instead, they’ll just keep the people at the bottom of the list on a yo-yo, bringing them back and then furloughing them time and time again as the money ebbs and flows. And that money — so, so much money — could be put to much better use taking care of those who need it most in this country.
I find myself surprised to make this argument, but to play devil’s advocate…
The American travel industry (I’d argue airlines most of all given the topic) has been decimated directly by government mandates and guidance to not travel.
If you compare it to government involvement/laws in, say, vehicle mpg or emissions, the government’s legal guidance and direction has almost always been phased in over years to allow companies to adjust without immediately being hurt financially by direct government guidance on their company.
In this case, states and the federal government have imposed restriction after restriction, often on a whim with little notice, that have deeply hurt airlines, companies with uniquely long term assets and heavy cost structures that require long term planning. I think we can all agree the majority of that guidance was needed to curb the pandemic (though perhaps some of the completely unenforced state and city quarantine restrictions were over the top given the complete lack of any enforcement).
As a taxpayer, I agree with you overall, I just think there’s something to be said for:
1. The government’s direct involvement in trying to persuade citizens not to use a company, airlines, via travel guidance or outright bans (via quarantines like in Hawaii or international restrictions now). That’s not entirely unique to airlines but the airlines are the top of a chain of many many businesses, like your own, that drive economic value.
2. The complete lack of coherent strategy in long term guidance about slot waivers forcing airlines to plan for an expiration of slot waivers that may or may not happen. And, before anyone jumps on me, allowing other airlines those slots may be the best thing long term, but I’m simply saying the current owners of those slots have to plan for what to do with them today and that guidance is ever changing.
3. Of the two above, it would be one thing if there was some kind of long term government strategy that companies with long term assets (airlines) could plan to, but there never are. For instance, the potential for Covid testing for domestic travel that bubbled up via insider reporting from DOT and cdc — how can any airline possibly plan for something that would start within two weeks and then destroy revenue more than it already had been destroyed and after payroll support programs expressly designed by the government to keep the airlines relatively full strength and ready to go and get the economy moving once they expire (preventing long term cost reductions) actually tie the hands to reduce cost via airport service requirements and personnel reduction restrictions.
Devil’s advocate position… I just struggle as someone with a more libertarian view on government involvement when the actual government direction and law and coherent strategy from the government, warranted or not, seems to be a large reason for current difficulty.
Even if government offered zero advice on the pandemic, corporations would still ban travel. Case in point — I work for multi-site operation. I can visit a site, BUT after I come home I have to “quarantine” in my house for two weeks and cannot visit another site for another two weeks. This makes zero sense to me — I can visit the grocery store etc, I just cannot come into contact with another employee. Why two weeks? Why not testing (my company can afford it)?? What makes travel so risky??
Fauci today were to hold a press conference that ended with, “Get on a plane and hit the beach” demand would not come back immediately. People will either ignore or supersede government recommendations with their own. And don’t forget about increased unemployment and diminished GDP. That’s not magically going to bounce back overnight — and is the big long term problem. Airlines need to get used to recession type economics — decreased spending on travel.
TBIT, you are on to something that most people ignore: it really isn’t the virus that is hurting the airline industry these days, it’s the government’s RESPONSE to the virus that is the issue. What we are actually seeing right now isn’t much worse than a bad flu year — and conditions are rapidly improving — but we still have a “climate of fear” being stoked by the CDC and the Biden Administration and various and sundry lockdowns by Blue states that have done absolutely ZERO to reduce Covid cases. That’s reality. The appropriate gov’t response would be to tell people the truth: that Covid is currently going away and we hope (but don’t know) that it won’t be returning. Keep vaccinating the vulnerable and hope that works and ultimately prevents another wave (we’re really not sure yet, but there’s some early evidence from Israel that the vaccine might somewhat reduce hospitalizations and deaths). Basically, do what Florida is successfully doing and try to get back to normal life. Instead, we get nonsense reports of supposedly dangerous “variants” that don’t actually increases cases in their home countries but serve as great excuses by fearful people to keep borders closed.
If the gov’t acted responsibly, no further bailout money would be necessary and the industry would obviously recover much faster. As it is, the industry seems well capitalized now and could survive even another year of the current climate of fear. But the unionization of the major airlines seems to give the industry plenty of votes for a third bailout, so it looks like the Feds will print plenty of money to keep airlines and their unions happy as they wallow in the silliness and waste of the current gov’t response.
Let’s keep in mind that “PSP 2.0” was originally designed as a 6 month, not 4 month, program. The thinking being that the vaccines would be widely available by spring, with the highly-contagious “mutant viruses” unknown at that time. Unfortunately, the vaccine introduction has been slow, uneven and cumbersome. And now, there are other, previously unknown, variations. It is currently clinically unknown how effective the two currently approved vaccines are against the mutations.
The good news is that there is a third vaccine pending emergency approval and it also appears that the two currently emergency-approved vaccines are being produced at a higher rate and the infrastructure to deliver them is also building out. Despite these two important improvements, it looks like the end of summer or early fall until enough U.S. citizens receive both injections and we develop “herd immunity” as a nation.
There is no question that there is tremendous pent-up leisure travel demand and I personally believe that our business traveller “road warriors” are also ready to return to the skies and get our nation’s businesses and industries back to some semblance of order. Frankly, everyone I know is sick of Zoom meetings and other computer-based professional gatherings. They want to visit their clients, make sales (or buys), renew relationships and create new relationships.
For all the reasons listed above, I certainly hope there is a PSP 3.0 for AT LEAST another 4 months, if not 6 months.
(Full Disclosure I was a M&A employee with United Airlines who was laid off “due to COVID”)
You are correct that these PSP programs are really just delaying the inevitable, and that each program cost the tax payers more and more per-head.
Where your analysis fails in the alternative. You mention, almost off-hand, that there are other programs like UI to cover the lack of employment. The problem is that these programs don’t come anywhere close to covering salaries and living expenses. In Illinois UI maxes out at just over 400.00, which I don’t think even meets local minimum wage laws, much less what it costs to live in Chicago. Missouri and Arizona come in near the bottom with UI that maxes out at 240.00/week. I challenge anyone to live on 240.00/week.
Now I tried to claim UI for Illinois and they fought me for weeks, so even though I was entitled to a benefit, they didn’t want to pay.
TL;DR: It’s fine not to like the PSP but you need to provide an alternative, and you don’t.
UnemployedUA – No question that the state UI programs leave much to be desired, but that’s exactly where the feds can step in.. and have to some extent. They had the $600 benefit originally which has now been reduced to $300. The Biden plan has a $400 boost, and of course, don’t forget the direct payments to people outside of this. Take this $25 billion (or whatever it will be) and instead of giving it to airlines to save some jobs, strengthen unemployment benefits.
Just as a point of fact. The 600/week was gone by the time airline employees became unemployed.
CF, my main issue with your piece is that it argues against something that helps people, while refusing to identify an alternative that does. If you want to write a piece that says “The government isn’t doing nearly enough to help people while bailing out large corporations” I am for that. But that’s not the piece you wrote. My alternatives are work for a company that took a bailout or subsist with no healthcare, working a minimum wage job, while burning through my savings and hoping that I don’t end up homeless.
If the only I can get help is indirectly through a government industry bailout, I am going to support that. Right now the US government is controlled by a block of people who believe that the best way to help people is to support corporations. If that’s the world I exist in, than that’s the world I exist in.
Support UBI, national health insurance, and housing as a human right and I am all. Until then, you’re arguing against the one form of support that I do get.
UnemployedUA – If you think this money is going to help people, then that’s the first mistake. This is helping the companies first and foremost. Sure it funds salaries, but many of those are going to be paid by the airlines.
This just takes that expense away from them while saving very few jobs. My proposal remains the same. Take this money and put it into strengthening UI benefits. Then it goes directly to people, not to subsidizing shareholders.
First, I am sorry about your job loss.
Second, there are plenty of other industries with significant covid impact. Even just in the T&E industry (hotels, transportation, car rental, dining). Airline workers that get laid off are worthy of our support but what makes airline workers more deserving of special funding?
I agree with CF in general. I will say, though, that if they go through with their latest threat to make all fliers test before flying they might as well drive a stake into the heart of the airline industry.
Not to get political but I wonder if hiding behind that is some progressive wanting to fight climate change and to kill air travel in the name of fighting COVID. And I say that as a Democrat who voted for Biden. Yeah
I’m torn on what I think this would do. I know (and appreciate) that Cranky tries not to get into politics much. But I think this subject would make an interesting post. The big thing that causes me to agree with your assessment is the cost of the tests. I think this will pretty much kill leisure flying. Especially because leisure is all about flying as cheaply as possible. ULCC’s for sure would be the hardest hit. I would rather drive across the country than pay to test my entire family. Although once my youngest hits 2, I’m waiting a while to fly anyway because I don’t want to risk getting deplaned.
I came here to see if there was discussion on the proposal floated for the COVID-19 test requirement for domestic flights…
I think Cranky could definitely write a good post on it (and I’d love to hear his opinion/analysis of it), especially if he did his best to stay out of the politics of it and just focus on the potential impact to the airline industry and the cost/benefit from a $ and health side.
I know that other areas are much better, but around me people without symptoms / doctors orders have to book testing appointments a minimum of 3-5 days out in order to get tested for COVID, and insurance and many states won’t cover the cost of “voluntary” COVID-19 tests (for those without symptoms or known exposure to COVID+ individuals). Even ignoring the costs, until/unless there’s much less of a wait for COVID-19 tests, I’m not sure it’s very ethical to get a COVID-19 test (potentially preventing someone else who “needs” the test much more, or who has symptoms, from getting the test or getting it a day earlier) just so that one can take a flight for a vacation.
That said, I have no problem with the usual questions & temp checks being done for pax before flights, and hopefully a reasonably accurate test will eventually be developed that can be done in a few seconds and for little more than the cost of a Q-tip, similar to the way that the TSA swabs bags for explosive residue and tests the swabs in a few seconds with the $$$$$ machines they have. If/when someone can create a machine that does that and lobby for it to be part of the airport experience just like metal detectors and body scanners, they will make a fortune.
From a cost side, the real/total cost (including the portion subsidized by governments in many areas) of a COVID-19 test is still equivalent to a very significant portion of (and even exceeds, in some cases) the one-way portion of a cheap domestic RT plane ticket. Enough said.
On a final note, I wonder if testing airline/airport/retail employees more frequently might be a more effective option than requiring negative tests for travelers, from both the health & cost sides of the ledger… When you think about how many travelers a day a gate agent or TSA employee get within 6 feet of each day, even with masks, etc, it may make more sense to test them than the travelers. I’d love to see a discussion on that.
Kilroy – No question that a testing requirement would be disastrous for the airline industry, but that shouldn’t be the threshold for the decision. It should be based on whether the science supports such a move. I’m not convinced it does, but I’m not an expert on that. I’ll trust the experts to do what’s right. If a domestic testing requirement goes into place, then I do think there’s a much greater rationale for federal funding, especially since there would very likely be people who would not be able to travel simply b/c they can’t get a test in time. There just isn’t enough capacity available.
Domestic testing would kill the industry. But, that seems to be the goal here. Think how much greener the planet will be.
Just an FYI, but the global spread of coronavirus, itself, is doing its very best to “kill the industry,” and not one person seems to be taking seriously the question of whether it is socially responsible for airlines to be accepting billions of government dollars just to keep facilitating the ongoing spread of the disease.
It is as though the fire department is paying the owners of a burning house to keep throwing gasoline into the still-burning fire.
You know what else has been a disaster for the airline industry? The global spread of coronavirus, facilitated in large part … wait for it … by the airline industry! Do you think things would be as bad as they are today if we had literally grounded global aviation for three months last Spring? Or if we had invested in quick-response testing at every airport in the country and had a negative-test requirement?
I don’t claim to have a definitive answer for that, and nobody else should either, but it is something worth thinking about when it comes to how much we’re going to pay an industry to essentially make the problem worse. Remember, taking the aid meant airlines were REQUIRED to KEEP flying… with almost no restrictions! This has turned out to be pretty counterintuitive to the long-term health of these businesses!
I actually think the PSP bailouts are quite good for the workers, but it seems to me it would make more sense to put SOME restrictions on the industry’s behavior meant to curb the spread of the disease in exchange for the funding to stay in business. I don’t know if that’s a discussion better suited for one year ago, or whether we are once again fooling ourselves into the magical thinking that this is all going to go away in just six more months and we should be talking about it right now.
I get that this is touchy, and there is no denying that the national response to coronavirus has been an unmitigated failure from the top for more than a year, but are things ACTUALLY getting better and is the light at the end of the tunnel ACTUALLY closer, or are we once again engaging in magical thinking — which has failed every single time in the last year, without question or exception in its entirety.
Hi Ramp Agent & others, I would like to suggest a 2011 film entitled “Contagion” for all to see that should answer almost everyone’s comments & questions. The similarities within the movie to what has been going on with CV are striking from the medical research to the social & to the denial of the illness existence witch then turns into ways to scam with alternative treatments. The only difference is the political figures are actually competent.
“Not to get political but I wonder if hiding behind that is some progressive wanting to fight climate change and to kill air travel in the name of fighting COVID.”
Do you think that this is some type of conspiracy against the airline industry? Choose your words carefully.
Domestic testing would kill the industry. But, that seems to be the goal here. Think how much greener the planet will be.
… or any new funds will be tied directly to an industry shut down to “fix” this. (which, still won’t happen).
Problem is, people from every walk of life – Democrat, Republican, Communist, Libertarian, White, Black, Yellow, Green – are disobeying orders. I know people who tested positive for Covid & saw them out at the grocery store the next day. A friend of mine completely ignored Seattle’s stay-at-home and quarantine orders to stay with her friends for a few days on a layover and take part in some protests. Another goes around the COVID screeners in Alaska despite not getting tested within 72 hours. And lets I mention some of our politicians – Pelosi, Gavin, Cruz — all seen without masks.
Yet, the airlines are being blamed. *rolling eyes*
There are those among climate change activists that believe the air travel system is a major cause, and they want it shut down.
As an airline employee I was strongly in favor of PSP 1.0. I dont care what industry you are in, but especially one that is as capital intensive as airlines, no one could be prepared for a 90% drop in revenues pretty much overnight, with billions of dollars of refund requests. That said, when my wife was laid off in another industry and I saw first hand the pain that she went through to get unemployment (it took her 10 weeks to get the first check) and then to have the federal unemployment $600 run out while she was still applying to hundreds of jobs… I was not the biggest supporter of PSP 2.0 and dont see any need for PSP 3.0. What we need is a better unemployment system, and especially today, what we need is some sort of enhanced unemployment and the billions of PSP money should be going there to help those that need it most. Sure, some will “use the system” as some politicians say…. but to make the majority suffer for the actions of a small minority is crazy. I would even like to see some of the money be used to allow those on unemployment to get education grants for certificate programs to help them gain the skills necessary to switch jobs if need be. There will be a lot of jobs that done come back, and some of those people will have to shift industries…. While I am not a big government person, I think those temporary measures, as well as increased spending on vaccines and testing, would benefit a lot more people than PSP 3.0 (or 4.0) until there is a recovery.
One side note…. if the government decides to do the asinine thing of singling out airlines for testing requirements (there was no mention of car, train, bus, etc…) for domestic passengers….then I may change my tune a little and say the government will have to do some sort of assistance for creating a mess they are not prepared for. But I would think that would be rapid testing sites at airports/downtown locations and things of that nature that are paid for by the government not the traveling public.
Great take Andrew. Lets fix the long term problem of short term unemployment. This should be a wake up call that instead of randomly throwing money around the next time this happens (and it will) we have a better system for tracking income and and can provide targeted relief to industries (like airlines / leisure / hospitality) that are more susceptible to the whims of the economy.
How about we do something really simple that saves a lot more money. Let’s release all of the restrictions in place and allow the people to decide for themselves if they want to travel. Now that Joe B is in power there is no reason to continue to destroy the economy and scare ppl in not wanting to leave their homes. The Dem’s strategy worked now open things up and start new ad campaigns about “safe travel”. Allow the ppl to decide the fate of the airline industry, and the rest of the economy at that, and save the taxpayers a lot of money at the same time.
WOW. How can this much ignorance exist in 1 person?
He’s not wrong, nor is he stupid. There’s no correlation between lockdowns and Covid rates. Go ahead, look it up. And the draconian European lockdowns really haven’t helped as much as you would think. This virus is with us to stay, so we are going to have to learn to live with it. You can try to argue that last sentence, but it is a fact – not opinion.
And, although a leftist politician can apparently hide in his basement and be elected president; the rest of us actually have to show up in order to succeed in life.
So what are we going to do about all of the unemployed people? Increase unemployment benefits, make medicaid more accessible, more direct cash payments? IF this is the only form of government support to workers, I am for it.
I was wrong. It seems more than 1 person can be totally ignorant.
You know… whether the Big Guy is right or wrong, your own ignorance and lack of mental capacity is exposed when you just call people ignorant without any cogent or coherent response to their comment and why it is or isn’t wrong.
The lockdowns are a rate limiting step designed to limit the flow of people into hospitals, and decrease deaths before the vaccines. Having people spill out of hospitals is horrible for care, and for the workers inside. Deaths were inevitable, but we should be ashamed to look at 465,000+ deaths and say “oh well.”
Note that the majority of peer reviewed scientific journals have praised the effectiveness of lockdowns. You are correct though the data may never be conclusive, however empirically if I don’t want the flu….then I avoid others with the flu : https://www.nature.com/articles/s41586-020-2405-7
“And, although a leftist politician can apparently hide in his basement and be elected president; the rest of us actually have to show up in order to succeed in life.”
Try something new – this as become old & I’ll bet you haven’t.
Problem is that the pandemic cares not about the economy, if there are flyers or not etc. This concept of destroying the economy makes for a good talking point, but is so far off the reservation that it is akin to a fairytale.
It’s just laughable how of touch US airlines are with reality. There is ONE solution needed, and that is for the government to stop being stupid (impossible, I know) and doling out public money to subsidize these behemoths. It will be painful, but there’s no way they will rationalize their route networks, workforces, and even loyalty programs until they are forced by the market to match capacity with demand. This will not be a simple, quick recovery (look at the news out of S Africa and the AstraZeneca vaccine), so the sooner airlines get out of the government trough, the sooner they can begin to rebuild their businesses THE RIGHT WAY.
Chase you’re right but what happens to all the people who work for the airlines? If the US had a real social safety net that supported people through the hard times, I would be on board for letting the airlines fail.
The problem is the airline leadership who have made millions and make multiple hundreds of thousands of dollars per year will not be hurt in the event of business failure. It will be the line employee who will be crushed. If the only way to support the line employee is to bail out the entire company so be it.
Why should the government pay for your lack of planning? Anyone working for an airline knows it’s a very cyclical industry, and you can find yourself without a job pretty quickly. The five, six, seven years prior to the pandemic have been very good for us airline workers. You should have been socking away cash for the bad times that you knew would eventually come.
Oh I did plan, and I made it very clear on where I sit. The first line of the constitution says the government is supposed to provide for the general welfare. If the government isn’t going to support the people during a period of national crisis, then what are we doing here? My issue with CF is that saying one of the few forms of government support to the people is bad without providing an alternative is asinine to the extreme.
This pandemic has further demonstrated the need for a strong social safety net in this country. As the wealthiest country in the world, it’s absurd that we need to fund companies to help employees, instead of simply helping the employees directly. At the federal level, I don’t think it’s out of any desire to “save private enterprise” but I truly don’t think the government has the capability (or perhaps even legal authority) to fund benefits for a subset of employees directly.
I’m a capitalist at heart and while it sucks that companies will fail, that’s how the system’s supposed to work. If an airline goes out of business, another will take its place (e.g. Breeze, etc.). And let’s be honest – it’ll likely instead be multiple bankruptcies and a merger versus an actual wind down. And that’s okay; that’s how the system is supposed to work. The shareholders get hosed but at the end of the day, shareholders also benefit from the good times as well. What we as a society need to do, though, is make sure help is provided in an expeditious way to those that need it directly (and not some laughable amount like a few hundred dollars a week). If I’m making high six figures and paying an obscene amount in taxes, I expect a little more from my contributions.
Just as the pandemic has exposed how much we rely on schools as the last line of defense for social programs (free meals, mental health, etc.), we need to seriously re-evaluate how we help those in need in this country. Countries like Portugal and Germany pay out something like 80% of your salary. And yet, we can’t figure that out? How other countries have figured this out and we can’t speaks volumes to how broken we are as a country.
Applause. Thanks for saying what was necessary. Socialism is a great thing no matter what the right wing in this country says & that’s not to the exclusion of capitalism.
Thank you. As you say, the two are not mutually exclusive. You can have a healthy, robust, competitive capitalistic society and still take care of your citizens. What’s comical is in the UK, the NHS is sacred. What they consider a “Conservative” there is would be called a Socialist here (even though most of the people using that term as an insult don’t really know what it means).
It’s simply a question of priorities. Why has EVERY wealthy nation on earth figured out universal healthcare but we haven’t? Why do the citizens of Ukraine get free post secondary education and we don’t? These are all very small investments (in the grand scheme of things) that will pay massive dividends and create strong consumers (because that’s what businesses need – people buying things).
I truly feel for the airline employees who view PSP as their last option and totally understand why UAEmployee supports it. I’m a GS/1K on UA (depends on the year) and my heart truly aches for the employees. Unlike others, I absolutely UA. I consistently have great flights, good FAs, etc. Could they do things better? Sure but as a FF, I feel I can appreciate the massive complexity of the operations. If PSP is your only option and the Federal Government can’t come up with better, then maybe that’s it. But I still think PSP is inadvertently subsidizing the airlines versus helping the employees.
Why is it the wealthy or those that can afford it from the universal health care nations come to the US for their treatment?
Why is that people who can’t afford it fly to other countries for healthcare? Because healthcare in this country is tied to your job. You lose your job – you lose your healthcare.
I’m not going to get into a debate but you’re posing a false equivalence. Having access to healthcare does not preclude those who are wealthy from purchasing higher/faster levels of care (which actually happens in these other countries). Also, the reason why wealthy people from other countries travel here is typically due to access to clinical trials, etc., and forms of treatment that may not be available where they live.
This is not the forum for this discussion but I would encourage to actually read the studies and not what media organizations are feeding to you. Many, many countries have accomplished this without sacrificing care or overburdening their citizens.
Please show proof that is the case & not act as if this is some Aind Rand fantasy.
I’m one of those people who tries to understand and appreciate all aspects of an issue. That doesn’t mean I’m successful at the endeavor, but I at least try. I’m torn about this particular question, but generally am coming to agree more and more with CF’s view.
The airline industry is obviously going to be smaller coming out of this pandemic and economic downturn. It probably got a bit too big, but I digress … I saw many posts on various sites that speculated about how the industry would cope with an economic downturn after all the years of relative prosperity. We at least partially know that answer. I’m not 100% sure of course, but I’m guessing that if this had happened in 2008, almost all of the U.S. airlines would have been in Chapter 11 by now. That’s how much the industry has changed.
Going forward, the questions come down to these: “What will the airline industry look like coming out of this?” and “How does the industry position itself for the future?” As I observe the situation, the first question has largely been answered, at least at the macro level. The industry will be smaller. The second question is still in flux, but it seems to me that all of the carriers have used the adversity to become more flexible and efficient than they were before. But the main question going forward still revolves around one item – revenue. Simply stated, bankruptcy cannot solve a lack of income. Therefore, it’s time to let each carrier do what it needs to do to maximize revenue, cut expenses, and position its business for the long term, and another short term bail-out only lets the industry kick that can down the road.
Thanks, DG, for a well-reasoned and concise response that avoided most of the politics.
I don’t agree with all of your points, and (call it naivete or optimism) I’m not personally convinced that 5/7/10 years from now the industry will be “smaller” (say, below 2019 pax levels), but I agree that the two questions you posed at the beginning of the start of your last paragraph are a great starting point for both the industry as a whole and for individual airlines and businesses as each organization and person does their best to adapt to the changing environment.
I probably should have made it clearer that I was writing in terms of the near future (the next 2 to 3 years) as opposed to 5 to 10 years down the road. I didn’t want to bring politics into my post. The choices are the choices regardless of one’s political views. Even though I tend to favor the idea that the industry needs to get through this on its own at this point, I’m not dogmatic about that view. I don’t know what the right answer is, and I don’t pretend to be an expert. I just have an opinion. Contrary to many of the comments I read here and elsewhere, I’m fairly optimistic that the industry can get through this and use the adversity to improve itself. I’m also a big believer in the old adage that anything that doesn’t kill you makes you stronger.
Agreed that subsidizing ~$1MM per job for well under a year of runway when we don’t know where the light at the end of the tunnel is (though there appears to be one) is a slap in the face of the tens of millions who aren’t in the airline industry. UI is 100% the better way to spend that money.
Likewise, even if the gov’t did full court press tomorrow promoting travel, people would know better and not enough of them would hop on planes to fill said planes, let alone expand flight counts to anywhere near 2019 levels. Businesses, concerned as they are about liability (inb4 someone mentions the business liability shield), would likewise keep their employees grounded, depriving airlines of premium revenues.
Ignoring the fact that more folks bouncing around spreads, you know, the disease that came here from not-here.
It’s still a head-scratcher why 100% of PSP bailouts weren’t structured as convertible debt, with the government taking an increasing stake in the airlines. AT least then, when the inevitable recovery comes, taxpayers would benefit from the money provided. But that would probably be a tall enough order that airlines wouldn’t take as much of the money.
Excellent point. It worked well with the automotive manufacturers and the government actually made a profit.
The government should adopt a plan to protect the oldest 29% of the population, accounting for over 93% of deaths. We should not treat every person as equal and reopen the economy to the maximum extent possible. People who are vaccinated and/or those with documented SARS-COV-2 antibody immunity should be allowed free international access. We need to start recognizing those post-Covid with unrestricted travel into and outside of the US. The current status quo is not unacceptable. We can’t keep the current trajectory.
On January 26th, 2021, load factors to many international destinations collapsed because the most recent Executive Administration imposed the international testing mandate for US entry. Many international routes went from 100% load factors to 10% overnight, where they remain. Therefore the US government itself indirectly harmed these industries, which increasingly resembles a utility.
You express discontent over the absence of furloughs, but the employees are the persons least responsible for this issue, which rests squarely at the feet of government policy and reckless excesses of airline-stock-buyback debt. You make no mention that airline leadership acted as corporate raiders removing value from these companies putting airlines in this precarious position. Absent the Glass-Steagall Act; stock buybacks prove in the SARS-COV-2 world to be the least fair use of cash. Airlines did not use their money correctly to reinvest or reduce debt. Instead, the majority of airlines gorged themselves on debt.
The post-SARS-COV-2 world may see airlines as more like utilities: more mergers and less appetite for a flag of convenience carrier like Norwegian Air International. The US Government has invested significant money into airlines—if we are going to let them fail now because of inadequate government policy, then be sure to also scrutinize stock buybacks.
One point that seems to be lacking here is that Delta has managed to reduce their workforce by 20% entirely through voluntary measures – primarily an extremely generous early retirement program, as well as short- and long-term leaves that include health benefits. And it’s clear that they aren’t pushing for another round of PSP (Ed Bastian pointedly declined to comment just last week when asked if he supported more federal money for the airlines). Delta also has done the best job reducing their daily cash burn, has the least amount of debt and appears to be in the best position to lead the recovery (not to mention that they did it without filling planes to 100% like everyone else). So if Delta can pull this off without a third infusion of tax money, why can’t AA and UA?
Full disclosure – Atlanta-based frequent Delta flier here who pretty much lives on their planes during non-COVID times.
Alex – The airlines have all done those things with varying degrees of success, but I think the ultimate answer is that the balance sheets at the different airlines were in different shape before this started. Delta was in a much better position to be able to weather the storm than United or American. But also, I think there is a difference in opinion here. United is very clear in thinking that this is going to be a different world, and there won’t be a need for as many people for years. It is going to downsize. Delta thinks things will snap back, so it doesn’t want that and instead prefers shorter term measures.
One other thing. I’m not so sure that United would argue for PSP as much if it weren’t for the employees wanting it so much. They would probably rather not subsidize Delta and Southwest and just make the hard decisions now for their own operation. But the employees won’t like that, and I’m sure United thinks it’s worth fighting for what it’s employees want in this case.
On Thursday, February 11th, the House included an additional $14 billion in airline aid in President Biden’s upcoming stimulus package. Once again, the Federal Government has acknowledged the critical roll the airline industry has in our economic recovery as we emerge from the pandemic.