The last decade has been very good to U.S. airlines. Industry consolidation, stuffing more people into smaller spaces on planes, and stacking fees upon fees have resulted in unprecedented prosperity for the country’s Big Four (American, Delta, United, and Southwest). From 2012 to 2016, these four airlines were the most profitable in the world, walking away with a combined $42.3 billion, according to an analysis by L.E.K. Consulting. In the two subsequent years, 2017 and 2018, the US airline industry raked in an additional $27.3 billion in profits. They then used nearly all of that money, a whopping 96 percent, to buy back shares from stockholders—a move that enriches investors while doing nothing for the company itself—and handsomely compensating executives.
Now, the airline industry, like nearly every other industry, is suffering due to the unprecedented coronavirus travel restrictions. The airlines are asking the federal government or a bailout of almost $60 billion, to be paid for with our tax dollars.
To which I say: Fuck that. The airlines shouldn’t get a dime from American taxpayers unless there are so many strings attached it can support a 787.
If a working class person had handled their finances in the same way the airlines have, it would be a caricature of a Republican talking point about individual responsibility. During the good times, airlines spent all of their money on financial chicanery and self-enrichment while saving virtually nothing for a rainy day. Now that the good times have stopped, they’re rapidly running out of cash, which is what tends to happen when you don’t have much sitting around. It’s like a meme about millennials and avocado toast except it’s about the boomers who run airlines.
You could be excused for doing this once, but not twice. The airlines should have learned their lesson after the September 11 bailouts that they are not normal companies. The industry, already in financial trouble, saw demand collapse all at once after which the feds gave them $18.6 billion in direct assistance and loan guarantees. The lesson here ought to have been that airlines are uniquely vulnerable to huge shocks and need to plan accordingly. These do not happen often—oh, once every 20 years, thereabouts—but often enough. That was not the lesson the airlines learned.
I suppose the airlines did have a plan. The plan was to get bailed out by us.
Fair play to the airlines, because they almost certainly will. Congress, which is comprised of some of the most frequent fliers and loyal airline customers in the country, will oblige them. Our political leaders will almost certainly meet the airlines on the industry’s terms because Congress overvalues the airlines themselves relative to the average American. A 2018 survey by an air travel industry group found 52 percent of Americans didn’t fly at all in 2017, and nearly three quarters of all trips were personal, not business. And airline flyers are disproportionately higher income, with the majority of airline trips coming from Americans with an annual household income of at least $75,000, well above the median household income (the most frequent fliers by income group, according to the airline industry survey, make more than $150,000 a year).
Airlines and other pro-business groups will argue a bailout is necessary in order to prevent massive job losses, an argument that made sense in 2001 when airlines were bearing the brunt of the recession following September 11 and mandatory flight groundings. But that argument doesn’t make sense today, because everyone is hurting just as much. The airlines, while experiencing massive revenue losses, can get in line with every other industry experiencing massive revenue losses, including but not limited to the entire hospitality and travel industry.
Even within the transportation industry, airlines don’t have a special case for bailouts. Public transportation is experiencing a similar shock, with ridership and revenue drops in line with what airlines are experiencing. According to the Bureau of Transportation Statistics, they employ the same number of people. Public transit agencies—which, it’s worth bearing in mind, are publicly owned and operated, not private corporations—are also asking for federal funds so they can keep running service for critical workers like hospital and grocery store staff, but they’re asking for about $13 billion, or about one-fifth of what the airline industry wants.
Some, like Florida Senator Rick Scott, have argued against bailouts of any kind for anyone, including the airline industry. At the very least, industries like airlines that quite clearly have embedded federal bailouts as part of their long-term plans need to have their courses corrected.
The exact details are up for debate, but fundamentally, the government must set a precedent for corporations that spend the boom years enriching themselves and their shareholders only to crawl to Capitol Hill hat in hand. Rather than filling up the hat, they ought to get a kick in the butt.
Massachusetts Senator Elizabeth Warren laid out a plan (of course she did) of what this might look like for companies that get federal funds including: a mandatory $15 an hour minimum wage for all employees, a permanent ban on stock buybacks, no dividends or executive bonuses for three years, and criminal penalties for CEOs who violate any of these rules. It’s a start.
We must also stop the cycle of corporations privatizing profits while socializing costs. Why should we, the taxpayers of the United States, spend $50 billion or $60 billion or whatever it may be when we see nothing in return? As of this writing, the total market cap of the Big Four US airlines is $54 billion, almost exactly the value of the bailout being proposed. What if, instead of bailing out the airlines, the US government became the majority shareholder of each so it could profit from its investment?
This is not some pie-in-the-sky proposal. It’s exactly what happened with Conrail, a government-created railroad entity formed in the 1970s out of the bankruptcy of a bunch of private railroads including Penn Central. The government bought the bankrupt railroads for dirt cheap then privatized Conrail in the late 1980s once it started turning a profit, netting some $3.7 billion in 2020 dollars for taxpayers.
Whether or not that specific model is right for the airline bailout is up for debate. But the general idea, that the public needs to stop subsidizing the irresponsible financial behavior of large corporations while the average taxpayer suffers, needs to be the focus of Congress going forward. Maybe, just maybe, we can come out of this mess with a fairer and more equitable relationship between corporations and the American public. And, while I’m dreaming, with some minimum leg room requirements, too.