Trade Group Asks For More Than $50 Billion In Airline Aid

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Airlines For America, a trade group representing U.S. airlines, has asked the government for more than $50 billion in direct financial aid and loan guarantees in response to COVID-19’s financial impacts. In a statement issued today, A4A said, “This is an extremely fluid situation that is evolving rapidly. The rapid spread of COVID-19, along with the government and business-imposed restrictions on air travel, are having an unprecedented and debilitating impact on U.S. airlines. This crisis hit a previously robust, healthy industry at lightning speed and we remain concerned that the impacts of this crisis will continue to worsen.”

The trade group says that U.S. airlines are “in need of immediate assistance” and proposed a combination of grants, loans and tax relief “as the current economic environment is simply not sustainable. This is compounded by the fact that the crisis does not appear to have an end in sight.” “This is a today problem, not a tomorrow problem. It requires urgent action,” said A4A President and CEO Nicholas E. Calio.

In its proposal, A4A suggests some $25 billion be set aside to support passenger airlines and another $4 billion to support cargo operations. The group is also setting the stage for an additional $29 billion in loan guarantees. As for tax relief, A4A is requesting a temporary repeal of federal excise taxes on Part 121 air carriers through the end of 2021. A4A is also requesting that carriers have the refund of the “federal excise taxes paid into the Airport and Airway Trust Fund (AATF) that have been remitted to the U.S. Government beginning January 1, 2020 through March 31, 2020.” 

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15 COMMENTS

  1. Two years ago A4A was telling congress that the airline industry was much more competent and efficient then the government. So much so, that air traffic control should be stripped from the FAA and privatized into an airline-industry-led corporation. Fast forward two years and A4A is asking the government for 50 billion in liquidity to keep their members afloat.

  2. Considering how well passengers get treated by the airlines, I doubt there would be much taxpayer support for this. Finally a county court judge has stopped the plan from the governor of Ohio to delay the primary election. With reports now coming in that persons that have tested positive for the virus never exhibited any symptoms, it is looking more and more like all of the corona virus fears is way overblown and that all of the nonsense and restrictions going on now are for nothing. Hopefully more legal actions can be filed and used to stop this madness. I have no problem with loan guarantees, but actual taxpayer grants or funds I do not support at all. With all of the airline travel restrictions, my company has been busy with charter trips. I am flying several live legs tomorrow.

    • Matt, I share your sentiments about the airlines, but your theory about this being overblown is not supported by CDC and NIH. “The corona virus fears” are not uniquely about the number of people who have tested positive though asymptomatic but are also about vast numbers of vulnerable people who may potentially be exposed in the future to infected people. These fears are about the numbers of positive diagnoses we might have 6 weeks from now based on current rates which could overwhelm current hospital capacity. Establishing social distance is all about not overloading the health care system capacity. Those of us distancing ourselves socially are doing it on your behalf in case you someday need an ICU in an overstressed system. Think of it in terms of us looking for the nearest suitable airport for you if you experience an in-flight engine failure even though you still have one engine turning on one of your “several live legs tomorrow”.

  3. The four largest airlines in the US during the period of 2015 through 2019 (inclusive) had an aggregate net income of just under $62 billion, according to the Bureau of Transportation Statistics. Knowing that the airline business is highly cyclical, one wonders what happened to all of that profit.
    While I have no issue with helping workers who will be impacted by this unforeseen event, I take issue with the idea of taxpayer support for private, profit making entities it appears who spent their money (as opposed to insulating themselves against a downturn which would surely have come at some point) and have come back to the taxpayers for more.

    • Over the last 10 years the airline industry sunk its profits into merger deals and a breakneck pace of asset expansion. When the industry could no longer support this from its profits, it went on a massive borrowing binge. The airlines became so highly leveraged that simply servicing their debt became a challenge – in 2019 Moody’s rated American Airlines corporate paper as Ba1, which is within spitting distance of junk bond status. Undeterred, the industry simply borrowed more to service existing debt and continue expanding. That worked well but it put the airlines one crisis away from insolvency.

      So here we are. Since 2010 the Dodd-Frank act prevented the banking industry from operating without adequate reserves. But no such controls exist for corporations. I think we’ve wisely decided to allow market forces to exact punishment for bad management in the corporate sphere. It seems we are now facing a dilemma. Do we let some, or all, the major US airlines drift into chapter 11, restructuring, and destruction of shareholder value; or do we extend the ‘Too Big to Fail’ approach to every sector of corporate America.

  4. So, more of these ‘companies that are too big to fail’ get help, but the local mom-and-pop shops get left out in the cold? So how is this right? A small business has to close for weeks due to this virus mess. Where is their bailout? What help are they getting from our tax dollars?

  5. Exactly, Rob. Let them go bankrupt. They will all stay in business. The problem they have is lack of innovation. They all act just like each other. Sometimes the destruction is necessary for progress.

    I’m sure there will be all sorts of fearful “what abouts”. That’s how they get us. Fear. We have to be strong and say no. The independent oil companies which are also in an existential crisis are saying no to bail outs. Good for them.

  6. If the government restricts travel, then the government has some kind of responsibility to the travel industry for the harm they cause. The nature of that responsibility can and should be discussed. Loan guarantees seem reasonable. Hand outs seem less reasonable. Tax relief is somewhere in between.

  7. Don’t know how much of an issue debt is to the airlines, however, if it is an issue, perhaps it’s time to call in the favor from the bailout of the banks a few years back. Maybe cause them to suspend all debt repayments, with no accruing interest.

    • I agree and I wish that could happen.

      But the airlines’ borrowing was largely financed through corporate bond issues, not the banks. That paper is held by a lot of different investors, including high-yield ETFs and pension funds. If the airlines don’t get cash quickly that debt will be downgraded to junk status and those institutional investors will be forced (by their own rules) to unload the bonds at a horrific loss. In a perverse way NOT giving the airlines relief would shift a substantial portion of their financial jeopardy onto the public. That is the dilemma. I don’t know what the right thing to do is now. It’s clear that no government action after the fact can replace the action of responsible, tough farsighted managers before it.

  8. At no point any for any reason should any company get tax payer money except in exchange for goods, services or equity. If an airline or aircraft manufacturer can not stay afloat with private investment then they should go bankrupt and the stock should go to zero. At that point the government or private investors can come in and then issue/sell new stock. This is what happened to GM and it actually worked.

    We need to end government funded corporate socialized losses.

  9. And how much have they spent on share buy-backs recently $60 billion. Share buy-backs are shabby little schemes to artificially boost share prices while escaping paying tax.
    Wonder if they said in their letter they are very sorry for using them?

  10. We all have our concerns. As for me I would want part of any government financial support to include requirements that seat pitch in economy be no less than 34 inches, free seat assignment, food provided on any flight over 3 hours and one free checked bag be included in all ticket purchases.

    Actually just hoping for unicorns.

    Notice I have not been unreasonable and asked that passengers be treated as they are on Asian airlines namely with dignity and respect.

    Regardless I am in the camp that airlines will not go away but may need to be restructured in bankruptcy caused by poor financial planning. Major corporations should not be living “paycheck to paycheck”.

  11. Bail them out in return for voluntarily dropping those putrid baggage charges, agreeing to provide enough legroom in each seat to avoid deep vein thrombosis, and capping change fees at $10 instead of $200. The airlines should have amassed enough money from baggage and change fees to carry them through. Southwest is pretty much there already and should be compensated immediately.