Airlines May Pick Bankruptcy Over Government Aid

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Top Democrats are warning the Treasury Department not to make the cure worse than the disease when it comes to coronavirus support for airlines. House Speaker Nancy Pelosi and Senate Minority Leader Chuck Schumer said in a letter to Treasury Secretary Steve Mnuchin they’re afraid the White House will drive too hard a bargain with the airlines and they’ll risk bankruptcy rather than accept the government help. “Assistance must not come with unreasonable conditions that would force an employer to choose bankruptcy instead of providing payroll grants to its workers,” they wrote in the letter, which was reported by The New York Times on Sunday.

The Trump administration is anxious to prevent airlines from using government bailouts to buy back their own stock to create value for shareholders rather than diverting the cash to keeping employees on the payroll. Mnuchin is demanding airlines pay for the assistance by giving the government a stake in their businesses, something they’re reluctant to do. Pelosi and Schumer said the intent of the assistance is to keep employees on the payroll and they urged Mnuchin to keep that focus. “We urge you to quickly and fairly enter into direct payroll assistance agreements with each of the carriers and contractors provided for in the law,” they said. Neither the administration nor the airlines have commented on the letter.

Russ Niles
Russ Niles is Editor-in-Chief of AVweb. He has been a pilot for 30 years and joined AVweb 22 years ago. He and his wife Marni live in southern British Columbia where they also operate a small winery.

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22 COMMENTS

  1. What a bunch of hypocrites! First both Pelosi and Schumer bellyache that President Trump is going to give away taxpayer money to big business so they and the rest of the Democrats along with Republicans pass an amended stimulus bill by a bipartisan vote. Now they both complain that the bill has too many conditions. One has to wonder!!!

    I could go on but I don’t want to get too political.

    • The bill leaves a lot of the nuts and bolts of the bailout up to the treasury secretary. If an airline goes into bankruptcy they can ask the court to invalidate union contracts and dump pension plans onto the PGBC. They can also seek approval to keep cash from passengers that bought tickets but have not been able to get their money back, like me. I am hoping that Pelosi and Schumer are standing up for employees and creditors rather than corporate executives..

  2. The bill was for directly helping people, not stockholders.
    Why would top Dems call it unreasonable if the president want’s to make sure it gets to the workers?

    • I’m not sure you read the article completely. That is EXACTLY what the Dems are trying to do – ensure that the money gets to the workers and not the retirement funds of the C-level suite.

      • “The Trump administration is anxious to prevent airlines from using government bailouts to buy back their own stock to create value for shareholders rather than diverting the cash to keeping employees on the payroll.”

        Where did I get it wrong?

  3. Apply the conditions so they don’t just use it as a “business tactic” Airlines ARE going to go out of business anyway as there was too much capacity BEFORE the virus struck. Do not bail out dead ducks just to see taxpayers money fund lawyers exotic holiday homes in the tropics!!

  4. As I noted earlier in another thread, SOME businesses will choose bankruptcy, rather than government loans. This should not come as a surprise to anybody. The bankruptcy industry has been around for a LONG time.

    The Roman Colleseum sentiment in all of this is very revealing.

    • Bankruptcy, including chapter 11, wipes out the shareholders. Managers that suggest that unnecessarily tend to get walked out to the parking lot with their box.

  5. Our Dear Leader has profited from the bankruptcy industry so he is wise to how businesses can deal with it

  6. Are we back to the thing where the Democrats love some industries and the Republicans others? It’s amazing how stupid people sound when they start fighting over money no one in the room earned yet no one seems to notice their stupidity during or even after.

  7. All businesses that accept government aid (bailout) should be prohibited from making stock buybacks or paying dividends for a long period of time (they probably wouldn’t need the bailout at all if they had kept the cash). Bankruptcy will hurt the stockholders much worse than losing dividends and stock buybacks. Also no executives should be paid more than say 20 x the average (mean?) worker (pick a number) – total compensation (including stocks, golden parachutes etc.). If the CEO doesn’t like it let him say no to the government bailout and allow the company to fail (as if any sane person would allow that).

    • The fact that some companies have said that they will forego government loans, and will file for bankruptcy, speaks volumes about what some people consider to be sane.

  8. misleading headline….politicians say airlines may choose bankruptcy….no input from airlines…dead story…

  9. The airlines may…or may not pick bankruptcy. Airlines may…or may not use government bailout money. Trump may…or may not “quickly and fairly enter into direct payroll assistance agreements with each of the carriers and contractors provided for in the law” (Apparently there is an unfair, slow way to enter into direct payroll assistance agreements). Pelosi and Schumer may…or may not agree to the law they agreed to and signed. Basically yes and generally no. A definite maybe. And that don’t make no never mind.

    Status quo for the leadership of the Divided States of America.

  10. Once you let the government to get in your pocket, they will forever be in your pocket. You will never be able to get rid of them. They airlines are well aware of that and not so sure they want to go down that one way road.

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