Time Is Running Out For Lawmakers To Save Airline Industry And Jobs

Congress rushed to approve emergency aid for the airline industry in March just as the economic shock waves of the pandemic were beginning to be felt. However, six months later it is becoming clear that the damage done to the industry—despite the government intervention—is more severe than anyone anticipated. Another government intervention may be the only way to forestall widespread bankruptcies and preserve the domestic airline industry.

Today, U.S. airlines remain in critical condition, and demand for air travel remains well below its pre-Covid levels. Domestic air travel is down 63 over year-ago levels and U.S. airline carriers have grounded nearly 1,800 aircraft that were in use earlier this year. International air travel has fallen 84 percent.

The massive Covid-induced collapse of air travel has forced the industry into survival mode. U.S. airlines are collectively burning through an estimated $5 billion of cash per month, well above the losses incurred in the six months after the 9/11 terrorists attacks or in the midst of the 2008 financial crisis.   

The precarious state of the industry might be news to taxpayers who had assumed that the multi-billion-dollar aid package from Washington would have helped sustain the industry until the worst of the pandemic passed. To be sure, the package was robust and included much of the assistance the industry had sought, including $25 billion in direct payroll assistance, but a capital-intensive industry like passenger aviation simply cannot reduce costs at all commensurate with the decline in passengers.

The industry’s path to recovery has become less clear since Congress first intervened. Industry analysts forecast aggregate losses approaching $100 billion globally this year, raising questions about when—or whether—the sector will rebound post-pandemic.

A complete collapse of the domestic airline industry would make our post-covid economic recovery more difficult, as the demise of incumbent carriers would make that industry’s recovery more difficult, and airlines play a critical role in the American economy. Besides connecting our country in ways no other mode of travel can approach, they directly employ hundreds of thousands of people while sustaining operations in U.S. airports that serve as vital hubs of economic activity for their communities.

While no one pretends that a collective bankruptcy of U.S. airlines would preclude future plane service, the ability of the industry to resume their pre-Covid level daily operations would be severely impaired if that were to happen.

The current dire situation will almost certainly require the industry to consider more drastic belt-tightening measures than the ones already implemented, which would inevitably result in tens of thousands of furloughs and further service reductions.

The aid Congress provided in March came with a requirement that airlines retain workers at full compensation and benefits until September 30, but with its expiration the airlines may have little choice but to implement further service reductions when the federal payroll assistance money runs out, particularly if the industry remains largely grounded and does not receive any additional government support.

Before the pandemic gripped the nation, the airline industry fueled $1.7 trillion in economic activity. In addition, carriers had some 750,000 people on their payrolls, even as the industry supported 10 million jobs in other sectors.

But airlines are a linchpin for the U.S. economy. The airlines have put in place an array of safety measures to reassure wary travelers that it is safe to fly, but it has scarcely budged demand from its nadir. Experts predict that even if a vaccine is imminent, it would still take 18 to 24 months before air travel returns to pre-crisis levels.

Until that resumption, the government needs to collaborate with the industry so that when the pandemic ceases, there is still a viable airline industry in the U.S.

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