Why the Airline Industry Should Get A Second Bailout

Chief executives from seven of the nation’s largest airlines wrote to Congress this week asking for a second round of payroll relief before the end of the year, in order to avoid mass layoffs and potential industry meltdown.

It follows an initial payment of $25 billion in federal aid under the CARES Act for airlines to keep employees on the payroll until the end of September.

So far economists have cautioned against a second bailout, warning that the unexpected longevity of the coronavirus pandemic means that any such lifeline would be short-sighted in the context of a global economic downturn.

However, failing to support the airline industry would not only result in the loss of thousands of livelihoods, it would also ignore the huge potential of the industry to offer long-term economic recovery.

Jobs

The airline industry directly employs some 2.2 million Americans and supports a total of 6.5 million jobs through the broader supply chain and tourism.

So far airlines have deftly managed to avoid job losses during the pandemic, carefully negotiating with pilots’ unions to ensure as many employees stay in the air as possible.

But without further federal aid job losses are inevitable. In June, United warned that 45% of its workforce could be made redundant and this week South West - who have never made any lay-offs in 29-years of flying - announced that they were considering placing 400 employees on furlough.

Overall, as many as 100,000 workers may lose their jobs in the first round of redundancies.

Of course this had not escaped the attention of economists, who nevertheless advised it was foolish to prop up jobs in an industry that simply would not survive a global pandemic.

In recent weeks, however, the situation has fundamentally changed. We have not one but two promising vaccine candidates, with dozens more showing positive trial results.

Several carriers have also rolled out successful pre-flight testing programmes, including United and American Airlines. Additionally, new research has shown the likelihood of catching Covid-19 on an aircraft to be very low, with just 44 confirmed cases linked back to air travel since the beginning of 2020.

As light begins to shine through the Covid clouds, what was a short-term bailout has now become a matter of economic necessity. Prior to the pandemic the airline sector was a financially viable employer to millions of Americans and it would be unforgivable for those jobs to be allowed to disappear with the end so close in sight.

The Vaccine

Speaking of the pandemic, the airline industry will soon have a far greater role to play in the fight against the virus than placing a bottle of hand sanitiser on the gangway

As airline execs told congress on Wednesday, the aviation sector will be absolutely crucial to ensuring the swift and effective distribution of any potential vaccine.

“As the nation looks forward and takes on the logistical challenges of distributing a vaccine, it will be important to ensure there are sufficient certified employees and planes in service necessary for adequate capacity to complete the task,” they wrote.

Efficient vaccine rollout is a logistical nightmare which every country in the world will have to face up to. In the UK, the government is already in talks with Amazon to help distribute jabs to its citizens, with the country’s postal service on standby to do most of the heavy lifting.

Following years of defunding to the postal service here, the private sector will be even more vital to ensuring Americans have access to the vaccine when it comes out. This will require airlines which are fully staffed and fully funded.

Economic Recovery

Finally, a second bailout for the airline industry is absolutely essential if America is to benefit from any kind of swift economic recovery following the end of the pandemic.

Pre-Covid the aviation sector contributed $779 billion to the country’s GDP, with international tourism supporting 4.2% of the economy overall. If the sector is to contribute anything like that again, it will need the manpower and the cash reserves to resume full services.

Unlike in other sectors, where new companies can quickly come along to fill a gap in the market, airlines take decades to be established and investors will be wary of ploughing huge sums into the necessary infrastructure.

Far better, therefore, to support the businesses which have already invested millions into the sector and continue to do so, in order to ensure our economy is ready to bounce back at a moment’s notice.

This would ensure the long-term success not just of airlines and airports but of the thousands of American businesses which rely on the travel industry – everyone from the President’s hotels to the t-shirt kiosks in Times Square.

Far from being a short term fix, therefore, the impact of a second airline bailout would be truly monumental: potentially saving millions of jobs and even lives.

Congress is currently at loggerheads over broader coronavirus relief under the so-called HEROES Act but policy experts believe there is still a chance for a separate funding bill to be drafted for airlines. If we have any hope of making it out of this crisis, it is imperative that this bill be passed.