The Economy

Airlines Seek Sweeping Bailout

If it happens, the request for loans, grants, and tax relief may come with strings attached.
Vincent RyanMarch 17, 2020
Airlines Seek Sweeping Bailout

The industry group Airlines for America is requesting an aid package from the federal government in the form of loans, grants, and tax relief that could total about $50 billion.

The aid request marks a major escalation for the industry as it deals with the economic fallout of the spread of the new coronavirus.

“U.S. carriers are in need of immediate assistance as the current economic environment is simply not sustainable,” the group said in a statement. “This is compounded by the fact that the crisis does not appear to have an end in sight.”

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The financial aid package has already been discussed with lawmakers and staff in Congress and within the Trump administration, CNN reported, citing two sources.

Meanwhile Boeing said it was in discussions with government and industry leaders to sustain its operations. Its credit rating was cut two notches by Standard & Poor’s on Monday.

U.S. President Donald Trump, in a briefing Monday, signaled a willingness to support the industry request.

“We’re going to back the airlines 100%,” Trump said, adding the crisis was, “not their fault. It’s nobody’s fault.”

Trump added: “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. It’s very important.”

Executives from the industry did not ask for a bailout when they met with Trump and Vice President Mike Pence earlier this month.

On the floor of the Senate on Tuesday, Sen. Chuck Schumer questioned whether a bailout of the airlines should be a priority.

“If we’re going to follow up the House bill with another major economic stimulus package, which we must, our major focus cannot be based on bailing out airlines, cruises, and other industries,” Schumer said. “We must first prioritize economic solutions that are focused on workers and their families.”

Other members of Congress are saying that any bailout must include worker and consumer protections.

Last week, at an investor conference sponsored by JPMorgan, executives from Alaska Airlines, American, Delta, United, JetBlue, and Spirit did not support the idea of a bailout.

Airlines saw a 40% drop in demand following the 9/11 terrorist attacks, and United President Scott Kirby said the expected effects of COVID-19 are far worse.

“When medical experts say that our health and safety depends on people staying home and practicing social distancing, it’s nearly impossible to run [an airline] business,” Kirby and United Chief Executive Officer Oscar Munoz said in a letter to employees on Sunday.

The United executives said the airline would cut capacity by 50% in April and May and expected only 20% to 30% of seats to be filled.

Separately, the director general of the International Air Transport Association, Alexandre de Juniac, called for the following measures:

  • Direct financial support for carriers to compensate for reduced revenues
  • Loans, loan guarantees, and support for the corporate bond market by governments or central banks, either directly to the airline or to commercial banks that may be reluctant to extend credit to airlines in the present situation in the absence of such a guarantee
  • Rebates, suspensions, or both on all employer imposed payroll taxes paid to date with an ongoing review for the rest of 2020; deferral or reduction in income taxes to date in 2020; and/or an extension of payment terms for the rest of 2020, along with a temporary waiver of ticket taxes and other government-imposed levies.

(Photo by TIZIANA FABI/AFP via Getty Images)