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.