Airlines: Crisis grows as passengers stay away
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The airline industry is hoping to avoid a crash landing as its bailout funds end, said Ian Duncan in The Washington Post. After a near-shutdown in March, the industry is still caught in a crisis as travelers continue to stay away from the skies. "Air travel is stuck at around 700,000 passengers a day, a third of its normal rate," and more than 1,800 U.S. planes are still parked because of service cuts. In March, lawmakers gave airlines $25 billion in loans and another "$25 billion in aid on the condition that they would not lay off workers until October." They expected the virus to be under control by then, or at least another economic stimulus package to be secured. Neither has happened. American Airlines, having already lost 23,000 workers through voluntary buyouts and furloughs, is ready to lay off another 19,000 of its 107,000 employees as soon as this week; United Airlines expects to add another 12,000 to the jobless count and has scheduled work reductions for 2,800 pilots.
The airlines' appeals to fliers and lawmakers are growing increasingly insistent, said Nikki Einstein in Bloomberg. American Airlines chief information officer Maya Leibman said that of all the travails her company has endured, including 9/11, this "takes the cake, in terms of crises." One recent study — sponsored by the airline industry — found that "the combined benefits of indoor mask wearing and HEPA air filtration systems" give passengers a less than 1 percent risk of getting COVID-19 on a flight. Convincing the public of that, however, "could be a five-year battle," according to the International Air Transport Association.
One reason the airlines are so public about their woes is that they see the prospect of more help, said Lauren Silva Laughlin in Breaking Views. If the U.S. is "handing out cheap money, American Airlines is ready to take it." The situation may not be equally dire for every airline: Delta and Southwest Airlines are avoiding layoffs for the time being. American Airlines, on the other hand, "took almost $11 billion in government aid and state-subsidized loans" and raised another $2 billion in debt and equity. "Considering American was burning through $30 million a day as of the end of June, that's enough to last it nearly five quarters." Instead of trying to get back on its feet in that time, American is turning to extortion: "Give us the money or we will lay people off."
Unfortunately, the exhaustion of the government's aid package doesn't just hurt the airlines, said Brooke Sutherland in Bloomberg. The first bailout stipulated that companies had to "maintain minimum service levels on the routes they were flying before the pandemic." Losing those guarantees means "more pain ahead for the maintenance and repair work" that aerospace suppliers rely on. There is also growing concern about the long-term impact on business travel, said Andrew Edgecliffe-Johnson in the Financial Times. As more frequent fliers adjust to working at home, as much as 25 percent of corporate travel might never return. A permanent pullback of "road warriors" could be devastating: While business fliers "account for as few as 1 in 10 airline passengers," they bring in up to three-quarters of the profits.
This article was first published in the latest issue of The Week magazine. If you want to read more like it, you can try six risk-free issues of the magazine here.