Airline Bailouts Are Necessary, but So Are Concessions
Taxpayer bailouts of airlines seem all but inevitable. Even the most cursory analysis would show that a rescue is in the national interest. However, there is a distinction between saving industries from a virus over which they have no control and saving them from themselves.
To wit, the four largest United States airlines are asking for about $50 billion in public aid to weather the COVID storm. Oddly, and sadly, this is roughly equal to what these companies spent between 2015 and 2019 on dividends ($6 billion) and share buybacks ($39 billion).
Airlines suffered after the September 11 attacks, then again during the Great Recession, and now amidst the coronavirus outbreak. So, even though airlines face an existential crisis about once every decade, this predictability has not compelled executive leadership to create reserves to help weather these storms.
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Though a bailout is necessary and these are difficult times, it also offers a unique moment to reign in an industry that has long visited suffering on the public from whom they are now seeking a rescue. Items that could reasonably be on the table in exchange for aid include baggage fees, change fees, vanishing leg room, and wages.
During the Great Recession, taxpayers bailed out investors who purchased so-called credit default swaps, which were a form of insurance peddled by AIG against a downturn in housing. While a rescue was vital, many taxpayers were appalled that the feds paid 100 cents on the dollar to cover AIG’s contracts which were underwritten with careless and ultimately incorrect assumptions. Hopefully, with the airlines, we have learned from the lessons of the past.
David R. Evanson is a financial journalist in Philadelphia.