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Vaccines Will Save Airlines; Not A Third Bailout

On Wednesday a House Committee will consider plans by Democrats to allocate a further $14 billion to airlines in payroll assistance. This comes after several carriers issued furlough warnings to their staff and is in addition to the $40 billion in federal funding that airlines have already received.

If you think all this is all starting to sound a bit familiar, you’d be absolutely right. The situation is an almost exact repeat of what the Trump administration faced back in December, when airlines were gifted a further $15 billion after threatening mass layoffs.

Now with their funding set to expire on March 31, American Airlines and United have again issued furlough notices to their staff, tallying up nearly 27,000 redundancies between them.

American Airlines are warning that up to 13,000 staff may be furloughed after March 31

At this point the American public might understandably have had enough. American and United may have fooled us once, but the aviation giants are now back in exactly the same position they were in a few months ago, with very little to show for it.

The situation is even more unpalatable when you consider that the pandemic has been raging since March and other airlines have managed to adapt far better. Delta, Southwest and JetBlue have avoided making even a single involuntary redundancy - largely through careful negotiations with their pilots’ unions.

Delta CEO Ed Bastian is even predicting that his company will break even again by the spring; just in time to take advantage of the “summer surge” in travel, as he puts it.

It is small wonder, therefore, that in the initial draft of his coronavirus relief bill, President Joe Biden proposed exactly zero funding for the airlines. If some companies cannot make the necessary changes after nearly a year of the pandemic, he reasoned, then it should not be up to the American taxpayer to bail them out.

However, a third bailout for airlines would not only be fiscally irresponsible, it would also fail to get to the heart of the issue. Payroll support would merely be wrapping an economic band-aid around what is fundamentally a health crisis.

American Airlines CEO Doug Parker encapsulated this in his letter explaining furlough warnings, writing that “The vaccine is not being distributed as quickly as any of us believed, and new restrictions on international travel that require customers to have a negative Covid-19 test have dampened demand”.

Even for responsible airlines, the lack of a long-term solution to the Covid crisis is fundamentally what is holding back profits. In practice this solution is mass vaccination and help with testing to facilitate international travel.

So far, the United States has only given a first vaccine dose to 13% of the population. This puts us just behind the UK with 19% but trailing a long way off Israel on 66%. It’s not a bad start, but it’s surely a long way off what the world’s largest economy is capable of. Even the airline staff themselves are not being offered vaccines at present, which inherently limits the ability of airlines to open up travel without putting their staff at risk.

If the Biden administration really wants to help airlines – and indeed the world – it would do far better to divert the $14 in funding towards the vaccination programme. This would allow millions of Americans to once again fly safely and ensure that airlines can plan their business models beyond when the next round of federal funding might be coming.

It will also break the endless cycle of bailouts from taxpayers, who will eventually be saddled with the check for all this government goodwill. In the long-run, if Congress prioritizes vaccination, it will be good for both our wellbeing and our wallets.

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