Hey airlines, we want our $80 billion back now!
The federal government threw airlines a lifeline after the pandemic started. Did the airlines throw a party?
When American Airlines canceled thousands of flights last weekend and blamed weather and staffing problems, maybe you wondered how that could happen. I did.
I mean, didn't American taxpayers give domestic airlines $80 billion to stay fully staffed? The money allocated for airlines under the CARES Act was meant as financial assistance for employee wages, salaries and benefits.
Maybe you were thinking the same thing a few weeks earlier when Southwest Airlines called off thousands of flights and also blamed staffing challenges.
It sure looks like the airline industry took our money, which was supposed to help them stay staffed during the pandemic, and squandered it. That's what you told me in Friday's Forum (you can get full access to the forum and other subscriber-only posts for just $60 a year, a 40 percent discount).
These mass cancellations raise a few key questions: What happened to the $80 billion taxpayers gave the airlines? We threw them a lifeline in early 2020. Did they throw a party? Also, can the airlines even afford to repay the money? And could this ever happen again?
What happened to the money?
The short answer is: We're going to get at least a partial refund. Some of the aid was in the form of loans, which the airlines will repay over time.
But what about the rest? The CARES Act requires airlines to refrain from conducting involuntary furloughs or reducing pay rates and benefits. How could they be understaffed now?
The answer is in the language itself: It says the layoffs have to be involuntary. In other words, the airline can't lay off employees.
American Airlines lost 31,000 employees last year as a result of voluntary layoffs and retirements, according to regulatory filings. That's a 23 percent reduction in the workforce. No wonder they don't have the staff to operate all the scheduled flights: The employees are gone.
I'm not the first person to point out this problem. They took the money and followed the letter of the law but did the exact opposite of what American taxpayers wanted.
Well, that's the airline industry for you.
What if the airlines repaid all of the $80 billion?
So here's the question: If the airlines didn't do what they were supposed to, if they took advantage of that word "involuntary" and made massive layoffs in a roundabout way, then shouldn't they just pay us back?
In the latest quarter, domestic airlines reported a profit for the first time since the pandemic started.
And in the latest quarter, to use American Airlines as an example, the airline made $169 million in profit on $9 billion in revenue. American can certainly afford to repay us, don't you think?
OK, I know that's wishful thinking. But what if the airlines were required to fork over every penny of that $80 billion? By the way, airlines made three trips to the trough — two in 2020 and one this year. Overall, that works out to $243 for every person in the United States.
But really, why not?
At the start of the pandemic, when it approved the first $52 billion in aid, Congress applied no conditions for customer service. No minimum seat room in economy class, no requirement to seat families together without charging a fee — nothing! Ultimately, market forces pushed airlines to drop their most unpopular change fees, but Congress had nothing to do with that.
The U.S. government made its expectations clear. The money for the CARES Act was meant to support American workers employed by passenger air carriers, cargo air carriers, and related contractors. Cutting almost a quarter of the workforce, as American Airlines did, was a brazen and direct violation of that mandate.
Maybe we deserve a refund.
This must never, ever, ever happen again
If this apparent theft of $80 billion in taxpayer money doesn't leave you infuriated, then I don't know what will.
But wait, there's more: We're about to see the fruits of the airline industry's deception. Demand for air travel is returning faster than anyone imagined. I'm willing to bet the Southwest and American cancellations are only the beginning. Add the upcoming holiday travel season, and we could have one of the worst seasons for air travel since 9/11.
Even if the airline industry gets to keep our money, we have to make sure this never happens again. Ever. At a time of Congressional gridlock, maybe we can at least agree that this kind of government largesse is inappropriate even in a worst-case scenario.
Sure, without the CARES Act a few of the American carriers might have gone to that Great Big Hangar In The Sky. But in the long run, that might have been good for competition, opening the way for new entrants with more nimble business models that depend on serving customers instead of charging fees.
📣 I'm interested in your comments! Do you think the airline industry did the right thing by taking the money and then offering voluntary layoffs? Or did it violate an unspoken agreement with American taxpayers? Do you want a refund? And bonus question: What would you do with the money?