Today United States President Joseph President Biden signed the American Rescue Plan Act of 2021. It is a bill with a price tag of $1.9 trillion designed to speed up the nation’s recovery from the economic and health effects of the COVID-19 pandemic and the ongoing recession. The bill includes $14 billion in payroll support for airline employees. This is the third bite at the apple for U.S. airlines.
Under Trump they received $25 billion in payroll support and $25 billion in loans under the CARES Act in March 2020 and $15 billion in another bailout in December 2020. The aid from the American Rescue Plan comes with conditions similar to the first two bailouts.
Airlines will not be able to furlough, layoff, or reduce salaries for employees through September 30th, 2021. There are limitations on dividend payments, stock buybacks and capital distributions, and executive compensation through September 30th, 2022. . Airlines can be required to maintain service to any point served by the carrier before March 1, 2020 although only one flight a week can satisfy this requirement.
It appears that airlines will make out like bandits again. The purpose of the payroll support is to prevent airlines from laying off employees because of sharply reduced demand for air travel. In other words, payroll support funds are used to pay people who have no work to do.
But payroll support funds can be used for any purpose. In the second round of stimulus, American Airlines received $3 billion towards four months of payroll; yet it reported that paying the full cost of previously furloughed workers cost just $100 million per month. The excess of $2.5 billion can be used for anything.
Payroll support is great for airline workers. No other employees I can think of have the luxury of being guaranteed full pay indefinitely it seems when they have no work to do. All other employees must rely on enhanced unemployment benefits and the stimulus checks and tax credits available to all. Airline workers also get those checks and credits if they qualify.
Travel in the U.S. may pick up in the summer as vaccinations should be available here to just about anyone who wants them. International travel will likely remain severely depressed into 2022. I would bet that airlines will be back once again asking for more public assistance when this aid runs out in the Fall. It is ironic that American, Delta and United have lobbied the U.S. government for protection from competition by Qatar Airways, Etihad Airways, and Emirates on the grounds that those airlines received government subsidies.
Even though many in America haven’t purchased an airline ticket in a long time, our airlines have found a way into our wallets and purses to the tune of thousands of dollars. It is undoubtedly too much to ask that when they are once again making money hand over fist, that they resist the compulsion to maximize their profits and minimize their frequent-flyer program costs at our expense.
What are your thoughts on airline bailouts? Do you think there will be more bailouts for airlines in the U.S. or other countries?