Airlines are struggling. Here's why you should care:
Airlines Receive Billions in Bailout Funds In March 2020, President Donald Trump signed the CARES Act into law, giving the airlines $50 billion in bailout funds. Half of the funds were contingent on keeping workers through Sept.
30. But since the pandemic continues to wreak havoc on air travel numbers, the airlines are running out of options that don’t involve a reduction in staff levels. White House Chief of Staff Mark Meadows said in an interview with Politico on Wednesday that the option of an executive action was viable if Congress cannot pass a second stimulus package. Meadows expressed his frustration saying,"Because if Congress is not going to work, this president is going to get to work and solve some problems. So hopefully we can help out the airlines and keep some of those employees from being furloughed.” American Airlines announced 19,000 furloughs and layoffs on Aug. 25 as the Sept. 30 deadline approaches. The same day, Delta Air Lines announced nearly 2,000 pilots will be laid off on October 1. In early July, United Airlines announced 36,000 layoffs amid the ending of federal funding. Southwest Airlines Co. has said enough employees opted into early retirement and leave that no furloughs are planned through the end of 2020. While a second stimulus package remains in limbo, Doug Parker and Robert Isom, the chief executive and president of American Airlines, sent a letter to employees stating their disappointment with the federal government. “We must prepare for the possibility that our nation’s leadership will not be able to find a way to further support aviation professionals and the service we provide, especially to smaller communities”, they said.Even if air travel isn’t a part of your routine, the airlines struggling is a concern for everyone. From tens of thousands being without work to plummeting stock prices, this impacts our economy at a grander scale than simply getting business and leisure travelers from point A to point B.Tens of thousands in the aviation industry will be either furloughed or laid off as a result of the pandemic. That is just the first layer of the economic disruption. According to Airlines.org, commercial aviation drives over 10 million jobs in the United States including many jobs that aren’t tourism or travel related. Worldwide, the airline industry lost over $200 billion in passenger revenue between January and July 2020. As tourism has nearly halted in America, billions in revenue from taxes have been lost. In 2019, the United States hosted nearly 80 million international visitors. This figure represents immense economic power that has nearly collapsed, with no end in sight. Prior to the pandemic, commercial airlines assisted in moving more than 58,000 tons of cargo. And with over 2,000 planes currently grounded, there are less opportunities for cargo to be moved where it needs to go, driving the price of goods up. In a CNN report early in the pandemic, it was reported that chartering a commercial airline to haul cargo had doubled in price. This resulted in several commercial airlines converting many of their passenger planes into cargo planes as the number of passengers fell by up to 90% in the spring.As millions of Americans invest their retirement funds into the stock market, they rely on the performance of American businesses to help grow their nest egg. A number of the largest funds and indices, including the S&P 500, include aviation based companies. And while your amount of flying may vary, the performance of these companies directly affect the value of the stock market.These losses represent hundreds of millions in lost value, and have trickled down to American’s portfolios. With all of these realities taken into consideration, here’s what the future holds for commercial airlines. First, the airlines will be free of any obligations in regards to CARES Act funding starting on Oct. 1. This will allow airlines to lay off employees as they see fit. Because the deadline is quickly approaching, airline employee labor unions are pushing to extend the payroll-support provisions of the CARES Act through March 31, 2021. This would add $25 billion for passenger airlines to the new aid package being debated in Congress. However, the funds would specifically be designated for payroll needs, and not other expenses. This struggling sector is going to press Congress for further action towards a second stimulus package. While there are arguments on both sides for funding/not funding the airlines, this leaves Americans in a similar position to bailing out the auto companies during the 2008 housing crisis. Should taxpayers help private companies bail out of a bad financial situation? The moral hazard argument may look good on paper, but when jobs are at stake the realities are a lot more nebulous. AAA estimated that 115 million Americans traveled for the holiday season in 2019. But with the pandemic continuing to surge, it is likely we won’t see anywhere close to that number. A recent travel industry survey reported that only one third of the respondents had even a tentative trip planned in the rest of 2020. Even those who do travel are more likely to visit destinations within 300 miles of home, which means they are driving, not flying. While the airlines are not in danger of immediate collapse, it will be years before they fully recover, if they ever do. Between the employment impacts and the hit to our retirement funds, the airlines’ grounding will affect all of us.
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