It is hard to find any industry that hasn’t suffered because of the US government’s response to the COVID pandemic. But airline travel was supposed to have been insulated from the worst effects by a $54 billion bailout that it received in 2020. That taxpayer money was supposed to have kept the airlines aloft so they would be able to handle renewed demand once pandemic lockdowns ended. It hasn’t quite worked out that way.
On the latest episode of the Drill Down podcast, jet-setters Peter Schweizer and Eric Eggers talk airline travel and the truth of the adage that government often hurts worst when it tries to help most.
The airline travel industry suffered a 70% decline in business during 2020 because of pandemic travel restrictions, dwarfing the 7% fall-off after the 9/11 attacks in 2001. Trying to help, the federal government distributed $54 billion to the airlines so they could maintain their staffs and be ready when business improved. Sadly, that is not what they did.
As Eric puts it, they used the money to pay their employees to go away, offering furloughs and early retirement packages to pilots.
In response to congressional scrutiny last year, the trade association Airlines for America (A4A) told lawmakers that federal COVID-19 aid covered 77 percent of the carriers’ payroll costs, saving roughly 736,000 industry jobs. But airlines say they were still forced to reduce staff, particularly when federal aid temporarily lapsed in late 2020.
The Biden administration and some consumer groups blame the airlines. The government argued the handouts should have allowed the airlines to keep themselves fully staffed as passengers returned.
As Peter points out in the podcast, the truth is that the government didn’t attach the right strings to the bailout money, so the airlines focused on reducing costs to the maximum extent possible. Thus, a government giveaway intended to help the airlines when business returned ended up exacerbating the pilot shortages that all airlines – and thus, passengers — are currently suffering.
Nor is it clear that staffing issues will be resolved any time soon. Peter notes that it takes 1,500 flight hours to become a licensed commercial pilot, and, while the industry aims to hire 12,000 pilots this year, the FAA issued fewer than 5,000 pilot training certificates in 2021.
In a recent letter to Transportation Secretary Pete Buttigieg, whose previous government experience was as mayor of a mid-sized college town, A4A complained about the Federal Aviation Administration’s own short staffing at its New York and Jacksonville facilities. United Airlines CEO Scott Kirby also highlighted those areas as some of the most pressing bottlenecks in an interview with CNN last week.
Eric observes that the money thrown at the airline industry resembles what happened after the 2008 financial crisis when government money flowed to the big investment banking firms on Wall Street, which then paid out enormous bonuses to their senior executives.
Meanwhile the delays, cancellations, and baggage handling woes are widespread. London’s Heathrow Airport just canceled the flights of 10,000 people. But the Biden administration is demanding immediate action from the airlines to solve these problems.
Eric notes that the Biden administration was not responsive to the airline industry for months. “They pleaded for the removal of mask mandates for six months or longer,” he says, “and the only reason the mask mandate is even gone is because a federal judge struck it down.”
At bottom, this remains a regulatory problem in an essential industry. Peter says, “These companies must be profitable during good and not good times, so they stay around. We need to create a thriving labor market so that the airlines can compete for scarce labor.”