Any thoughts on airline *stimulus?
Let's have some fun with numbers.
- A/O 3/25 passenger numbers have dropped by almost 90% year of year, same date. (TSA.gov - checkpoint travel numbers)
- The industry employed about 713,000 people (FT and PT) as of January. (Bureau of Transportation stats -
https://www.transtats.bts.gov). I believe the total includes people who work for FedEx and UPS which will probably be the most unaffected during this crisis, but we will keep them in the numbers.
- Airlines got $50Billion in the bailout. That is $70,000 per employee.
- within hours of the announcement, United said it wasn't enough and there would be layoffs by September if there isn't an improvement in revenue. This is certainly believable with a 90% drop in business.
The question is where do you apply the money to "save" the airlines. $70k per employee would almost imply that you could let them go bankrupt and reorg (again) and just pay the employees and let the investors eat the loss. The narrative from one side of the aisle is you don't want to encourage people to remain unemployed, and $70k might be enough to make me sympathetic to this view, but if less then it is just cheaper for us all. If you give the company money now rather than force chapter 11, you save the investors - equity in particular but probably some lower tranche debt investors too. The Airlines argue that this is a completely unforeseeable, government driven event. I find it hard to differentiate between this and September 11, which was also unforeseeable, and the recession that followed. After that, almost all the majors filled chapter 11. List of Airlines chapter 11 bankruptcies are here (
https://en.wikipedia.org/wiki/List_of_airline_bankruptcies_in_the_United_States#Chapter_11).
The bailout means that airlines are not independent transportation service providers, they are essential infrastructure to the functioning of the country/world. They are utilities. If they want the government backstop like utilities, I want them regulated as such. That means I will start voting for politicians that want to give me more leg room. I don't give a shit if airlines ever make another cent in net profit as long as the places operate in a timely and safe manner.
I tired of all companies not managing for unforeseen events. The evolution of business over the last 15 years has shown that bigger is best because you are too-big-to-fail and don't have to prepare to survive a downturn, because you can get one from the government if you just hit the right note of "saving employee jobs" on the dog whistle to get congress ears to perk up.
You pointed out a fact that requires a little additional context.
The airlines must maintain service to all the destinations they served on March 1, 2020, through March 1, 2022, which could mean continuing to fly empty or near-empty planes.
While they need to maintain service to a destination, I think that can be one flight rather than several. Airlines have been given slot waivers. The rules say that the airline has to fill a certain % (I think 80%) of the flight slots to a destination airport or lose them the following year. The waivers mean that the airlines don't have to fly empty planes just to fill the slot. It doesn't benefit anyone to fly an empty plane, and the waiver saves the airline money and costs us nothing.
