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Have Airline Bailout Been Worth The Money?

In 2020 the airline industry looked like it could face extinction. With flights grounded, borders closed and no vaccine in sight, the Covid-19 pandemic seemed to spell the end for international travel, threatening a multi-billion-dollar industry which supports thousands of livelihoods.

In a bid to protect US airlines, the government supplied carriers with $39 billion of financial aid in order to prop up the industry until a solution could be found. This relief came in the form of three payroll support packages.

Over one year later, has the money been worth it?

In short, yes. Planes are still flying and passengers are still able to get abroad this summer.

Implementation of the Payroll Support Programme saved as many as 75,000 jobs across the country, with most of these remaining at full pay. Subsequently, tens of thousands of individuals across the country received a salary which they would otherwise have struggled to obtain.

Because of the payroll support programme, neither Delta nor Southwest furloughed a single employee last year.

However, as with anything which has not previously been tested, the bailouts were not perfectly managed by either the airlines or congress. Airlines failed to foresee increased demand and congress’ planning also resulted in a large gap of financial support in late summer/early fall.

“What didn’t work was Congress’ ability to keep it in place. They couldn’t afford to keep the payroll in place,” Sarah Nelson, president of the Association of Flight Attendants commented.

“We warned Congress that if they didn’t renew it last October, we wouldn’t be in our jobs,” she added.

As a result of these gaps in funding, many airlines furloughed workers, going against the rules and regulations of the Payroll Support Program. However, neither Delta nor Southwest Airlines furloughed a single employee throughout the whole pandemic.

In spite of these shortcomings, the bailout package overall was a vital lifeline to an industry which was on its last legs as the pandemic swept its way across the country.

Nelson said that the shortcomings were a sign that “PSP works. If people are upset about the 1% to 2% pulldown in flights, imagine what it would have been with no funding.”

Although the bailouts have been a huge lifeline for the airlines, those which mismanaged their finances are still struggling to see profits over one year later. For example, American Airlines, who furloughed the most workers of any single US airline, saw a net loss of $1.3bn in spite of the funding received.

By comparison, Delta and Southwestern, who never furloughed staff, have come out of the pandemic strongest. Southwest posted a $116 million profit in the first quarter of 2020. Without the federal money, the airline would have instead posted a loss of $1 billion in the same period.

To conclude, the bailouts were an important investment by the government into the economy which also helped ensure flight availability for millions of travellers this summer. To prove it, airline stocks worth less than $20 in May 2020 were worth over $60 by March 2021.

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