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Don’t Feel Sorry For The [U.S.] Airlines

Headline on a recent NY Times column, which points out regulation we should demand before we bail out publicly-traded airlines, like we did the banks in 2009:

https://nyti.ms/2QkNj3N

Posted by
10681 posts

Depending on the year airlines net 3 to 9%. That doesn't leave much wiggle room. Yes, I will feel sorry for all those people who have or will loose their jobs. Jobs that may take a decade to return. Then many of us living on our 401k's will feel the hit as well. I dont know if bailing anyone out is a good idea, but this is a better time to pull together than point fingers.

Posted by
15566 posts

I do like the idea of mandating some sort of minimum volume per passenger seat. As seats keep shrinking, airplanes have become virus spreading incubators, as well as air-rage-generators.

I couldn't help but notice that on a recent completely full Southwest flight, there was empty space in the overhead bins. "Bags Fly Free" has its benefits.

Posted by
4669 posts

I didn't mention an earlier Times Business Section column (not Travel related) that suggested that citizens should begin a general discussion of bailouts now, before they happen, so that they are not as controversial as they were in 2009. There is going to be very serious economic damage from the necessary viruse response.

Posted by
8491 posts

Just remember.......when the banks were bailed out, they paid back the bailout money with interest.

Unfortunately, in the U.S., the airline industry is a necessity. We rely too much on planes to not only move people but to also move cargo. If airlines go under, thousands of people will be unemployed and that will add to economic burden this country is going to face from the corona virus.

It might be cheaper to bailout the airlines rather than deal with the aftermath of their demise.

Of course, we could "persuade" them to do more for their customers. But that's probably going to take an act of Congress.

Posted by
3931 posts

I couldn't help but notice that on a recent completely full Southwest flight, there was empty space in the overhead bins. "Bags Fly Free" has its benefits.

Sam, in more ways than one. My 92-year old dad recently flew to Phoenix to visit my sister, and we were relieved to find a non-stop flight for him. I had warned him about having to pay for his bags, but I was delighted (as was he) to learn that Southwest allows two checked bags per person. It was a blessing for Dad, and saved the rest of us a lot of worry. They also cheerfully supplied a wheelchair. He doesn't usually use one, but walks very slowly and would have had trouble traversing the long airport hallways.

Three cheers for Southwest!

Posted by
4669 posts

Frank, banks are a necessity too (as the legions of "unbanked" people paying fees because their employer pays them on a third-party debit card show ... ). And the Great Depression showed that banks need to be regulated in order to operate in a sustainable manner. That regulation was very successful-until their lobbyists got the rules loosened.

Posted by
10681 posts

I'm sort of happy with the airline industry these days. They give me what i need at a price I can afford and there is enough competition to provide me options; including luggage options.

As for the quality of the air, the CDC says:

Because of how air circulates and is filtered on airplanes, most
viruses and other germs do not spread easily. Although the risk of
infection on an airplane is low, try to avoid contact with sick
passengers and wash your hands often with soap and water for at least
20 seconds or use hand sanitizer that contains at least 60% alcohol.

Granted this one comes from a biased source, but I am in a business that deals with the same issues and it is consistent with what I know. https://www.askthepilot.com/questionanswers/cabin-air-quality/

Studies have shown that a crowded airplane is no more germ-laden than
other enclosed spaces—and usually less. Those underfloor filters are
described by manufacturers as being of hospital quality. I needn’t be
reminded that hospitals are notorious viral incubators, but Boeing
says that between 94 and 99.9 percent of airborne microbes are
captured, and there’s a total changeover of air every two or three
minutes — far more frequently than occurs in offices, movie theaters,
or classrooms.

Posted by
6061 posts

This article makes perfect sense, I was thinking the same thing. No bailout without doing away with usurious fees and unfair practices, which have skyrocketed unabated. Congress and DOT/ FAA need to both grow a spine (Congress would have to legislatively expand DOT's/FAA's authority first). Recently, I sat on hot/stuffy American Airlines plane for 3 extra hours docked at the gate because they had mechanical issues - this was on a 2.5 hour flight from MIA to DCA. One's only option given by the Captain was to disembark without luggage (if checked in) and overnight at own expense (and then rebook the next day). Compensation was a measly 5k miles posted to my account and I had to fight for it (if this happened in the EU, passengers would get a mandatory set compensation). Things happen, but they need to properly compensate passengers for things under their own control. Airlines have mega-merged and are in much better financial shape than after 9/11 and 2008.

Posted by
521 posts

I think Tim is highlighting a larger issue and an opportunity/mandate to identify change. This crisis has highlighted for us the very real effects governmental and business policies and decisions have on all of us as individuals and as a community. This is a chance for people to make demands of businesses and government that will benefit all of us.
To wit: 1) under funding and undervaluing the CDC and discontinuing the national team looking at global pandemics has severely crippled our National response.
2) consistently denigrating and dismissing scientific knowledge undermines any rational attempt to address problems in an effective manner.
We, as a people , can disagree on how to respond to a problem, but we must call out elected officials who refuse to face facts .

3) We have moved to a gig and service economy and , by de facto, accepted lower costs for a less secure economy for our neighbors. So, now, we have millions of our neighbors, thru no fault of their own, at home without a paycheck or insurance. Was I the only one who did not know that working at Madison Square Garden as an events person meant you had no guarantee of pay? I have been shocked by how many of my church friends are saying that they will not be paid during this quarantine. What are the measures government and businesses taking to support these people? Many of us are two paychecks away from homelessness.
4) Lack of paid sick leave or a culture of work at all costs means even those of us with paid sick leave are reluctant to take days off for 'just a cold or a virus'. This is not good for our community as a whole, especially for our elderly, young and immunocompromised neighbors.
5) Ignorance and lack of health insurance keep people from getting the basic vaccinations. Get a flu shot!
6) We knew airlines were not effectively cleaning planes between flights . How many times did I find junk in the set back pocket or between the seat?
Many of us have been blessed to have been sparred a great public health crisis. I am ashamed to say, but it is true, that the AIDS epidemic in the 80's was presented as a problem that would only happen to "them". Now we have a public health crisis that affects all of us. ( albeit with higher risk for some). This is an opportunity to look at issues thru a public health lens and demand that government and businesses do their part.

I do feel very sorry for the millions/billions affected . I am most interested in how we are going to keep people from being evicted, losing their homes, their small business, fed , etc in the coming months. Personally, I would like to hear from the airlines how they are mitigating the effect on their workers , terminal workers and customers with the bail-out money. Are airlines giving their customers generous rescheduling or is it tough luck?Similarly, how are big companies like Amazon , Mac Donalds etc- stepping up- or are they hiding behind 'franchise' and 'independent contractor' loopholes.
I actually am at home on a paid sick day- feeling better as I have the energy today to rant.Grateful to have a salaried job, that I have sick time, and that I am far enough away from retirement that my 401 K should recover a little. ( and yes, very grateful that I should get Social Security and that my father gets his as he watches his retirement account fall). I'm grateful that I have a home to isolate in, as many do not. I'm grateful that, if my trip gets cancelled, it will be a disappointment but not the only opportunity I'll have.Friends have had their trip cancelled-it was a truly once-in-a-lifetime trip . We are hoping they can recover some of the money. Grateful for this on-line community.
Next topic: What to do in isolation.

Posted by
2278 posts

There’s a lot not to like about airlines and changing all of that would be good. But, right now, the patient is dying. Do you extract pledges to stop smoking, exercise more, cut out the donuts before you agree to resuscitate them? I don’t think so. Airlines are a vital part of the economy and they are in really big trouble right now. Not because of baggage fees, overcrowding, poor on time statistics or anything like that. This virus is killing them swiftly. If a bailout is what’s needed to save them I’m all for it. Plenty of time to work on the other stuff assuming they survive.

Posted by
2809 posts

Debt-financed stock buybacks are problematic to some extent, but financial management notwithstanding, airlines are a fairly commoditized business.

They operate fleets made of pick-and-mix from 2 major, 3 minor and a handful oddballs airplane manufacturers. Airplanes are easily interchangeable (changing seating plans, livery and upholstery and the like is cheap and incidental to the overall costs of operating and owning a plane. Thus, you have this large firms that own and lease fleets.

Airlines also, for the most part, don't own the air transport infrastructure of airports, air traffic control etc.

This means that the barriers to entry the business of commercial aviation are relatively low. If United AND Delta went bust, new airlines would sprung up, creditors would have taken the airplanes and stored them... pilots and FAs would be available to operate the same plane types with relatively minimal extra training... This is why there are so many new players that dip their lines in commercial aviation, most of them failing for commercial reasons (such as the strength of code-share and hub networks).

Any bail-out of the airlines would have to come with stricter provisions than those of the automaker bailout of 2008-2010, including wiping out the almost everything from existing shareholders (it is only fair) and then having the shares shold by the Treasury or whatever bailing out entity in the future, for gain.

This all being said, it seems the author of the article has set his wish-list on things like cancelation fee limits (which bring tons of unintended consequences), seat pitches (must be defined at IATA global level to stick), and bringing back mandatory bundling of luggage allowance into the chepaest fares, and other minor issues. I think a strong, EU-like compensation regime would be much better in terms of delivering the right incentives for airlines. Strong automatic compensation provisions would make it expensive to delay planes, have crews too tight for the overall schedule etc.

But at least this was not the same as the other commentator (on LA Tribune, I think) suggesting that the government should bring back regulated fares with limited discounts and let airlines compete for service, not price.

Posted by
1840 posts

I feel sorry for the airlines and their employees (though not for Doug Parker). While I realize this statement is odd to many, Delta is my favorite brand with which I interact.

Posted by
4669 posts

Here is a link to the earlier NY Times article I mentioned, which suggests that we have a discussion (moral, practical) of bailouts, this time, before our government begins providing them.

https://nyti.ms/2vN8eWn

The article by Andrew Ross Sorkin begins:

Bailouts. Stimulus. Corporate socialism. Welfare for business.
We’ll be hearing a lot about the idea of plowing taxpayer money into the economy as the damage — human and economic — from the coronavirus outbreak leads to a conversation about government bailouts.
We’ve been here before, in fall 2008, when the U.S. government bailed out the banks and later the automakers. It, too, was a presidential election year. That was a man-made catastrophe. This one is more like a natural disaster, with man-made mistakes along the way.
The argument for bailouts back then was that letting the banks and autos fail would be so devastating for the economy — and politically unpalatable — that lawmakers had no choice but to save them.
But, if you remember, the recriminations came as quickly as the money: Were the terms too generous? Should taxpayers have received more for the risk they took? Should the money have come with significant strings attached that would change the structure of the companies and industries? Or, rather, should the money have gone directly to workers and other people hurt by the failure of the companies? Invariably, the conversation turned political, with calls that such bailouts were the equivalent of welfare for companies or corporate socialism.

I regret that non-subscribers can only read five NY Times article for free per month. But the Times says it is providing free access to "Coronavirus" coverage. Because I'm logged in, I can't tell if the two articles I cited are "free to all."

Posted by
4857 posts

Press conference today (3/17) the president said we will help the airlines "it wasn't their fault". Just no decision on how, when or how much. So apparently no need to waste time with silly pointless public policy debates (sarcasm).

Posted by
6061 posts

Aid for the poor (Medicaid, SNAP, etc) is thoroughly scrutinized, debated, cut back, etc.; yet bailouts to giant corporations that have not saved for any rainy day, let alone an extraordinary event...not so much. No strings attached bailouts to the airline industry...ridiculous.

Posted by
22 posts

I just want to made whole if Delta cancel by 2 business class tickets to Amsterdam in late May. The tickets are non-refundable, so if I don't make the flight, it's my fault and I should lose my investment made in October. However, if Delta chooses to cancel the flight, I should be given the option for a cash refund.

Offering a no-fee change of flight, as long as the flight is before the end of 2020, and having to pay any difference in fare, is complete BS! Like hell should airlines get any bail-outs until they make passengers whole! I'm hoping others in this situation contact their US Rep and make this simple qualification mandatory. I personally don't want to be giving Delta a $6,500 bailout in addition to whatever they suck out of the US Treasury.

Posted by
4857 posts

For the sake of accuracy, here is what the president said today in the Q&A section of the press conference about airlines (from WH site):

As far as the airlines are concerned, the airlines — we’re going to back the airlines 100 percent. It’s not their fault. It’s nobody’s fault, unless you go to the original source. But it’s nobody’s fault. And we’re going to be in a position to help the airlines very much. We’ve told the airlines we’re going to help them.
Q They want $25 billion.
THE PRESIDENT: Well, we’re going to be helping. We’re going to be backstopping the airlines. We’re going to be helping them very much, John. It’s very important.

Posted by
74 posts

US airlines have used the bulk of their cash flow during their profitable last decade mainly for stock buy backs. Yes, we need to consider the job losses as a plausible justification for a "bailout". But there needs to be sufficient strings attached so we are not financing this type of behavior. They need to save for a rainy day like the rest of us. We travelers obviously want them to succeed but come on... rules need to be put in place .

https://www.bloomberg.com/news/articles/2020-03-16/u-s-airlines-spent-96-of-free-cash-flow-on-buybacks-chart

Posted by
10681 posts

At least have some concept of what you are talking about; buybacks: https://www.investopedia.com/ask/answers/042015/why-would-company-buyback-its-own-shares.asp

Airline Profits
2019 profit margin 3.1%
2018 profit margin 3.4%
2017 profit margin 5%

In 2019 the average profit per passenger was $10.15. Sort of explains the buyback. If the CEO and the top 10 wage earners worked for free, maybe the profit margin in 2019 would be 3.1000009 and the profit per passenger might be $10.16

Posted by
4669 posts

Sorkin has a follow-up NY Times article today (3/18/20), calling for a much larger, more general bailout. But he concludes with this:

But once we do that, and the economy gets back on its feet, we need to have a very serious, almost grave, conversation in the country with our political and business leaders about financial responsibility and our policies. Over the past 20 years, we have lurched from bailouts to wars to rescue packages to bailouts again, and we never fill up our coffers during the best of times to pay for any of them.
At some point, our debt will become the crisis that we can’t end with more money.

https://nyti.ms/3d6S2zP

Posted by
10681 posts

Tim, your last post I agree with completely. Dont confuse me not hating the airlines for me liking the idea of a bailout.

Posted by
3118 posts

While I may not feel sorry for the airlines, I do feel sorry for all of the front line airline employees who will, once again, be tossed aside in the name of corporate profit and all of the companies that supply the airlines who will most likely never get paid for a lot of what they are supplying during the crisis. Meanwhile, the C level suit wearing group will slap themselves on their backs once they receive the government billions and congratulate themselves on keeping the business afloat while earning their outrageous salaries and never missing a single bonus paycheck. Ah, life at the top.

Posted by
4669 posts

Replying to Mark, on the C-suite:

“Such cases have provoked accusations of elitism and preferential treatment about a testing system that has already been plagued with delays and confusion, and now stirred a new national debate that has reached the White House — with President Trump being asked at a Wednesday news conference whether ‘the well-connected go to the front of the line.’

“‘You’d have to ask them that question,’ he replied, suggesting that should not be the case. ‘Perhaps that’s been the story of life. That does happen on occasion, and I’ve noticed where some people have been tested fairly quickly.’”

https://nyti.ms/395aR3c

Posted by
10681 posts

Lets see, my secretary gets sick, she is out of work. I get sick, the business closes and 30 people are out of work. Who should be tested? No idea. Actually, I wouldn't accept it before my staff got it, but it still doesn't make it smart. We still have as fair a system in such matters as any place in the world.

Posted by
2297 posts

Great post, Diane. I can't resist-AOC got some of her Green Deal without any action from Congress. Air pollution is way down in China too.

Posted by
3306 posts

FWIW, according to the Atlanta Journal-Consitution, Delta Airline's CEO is giving up his salary for six months.