U.S. Seeks To Strike Balance as Industry Pleads for Bailouts

 - March 19, 2020, 4:30 PM
A Delta Air Lines MD-88 lands at Atlanta Hartsfield International Airport on April 24, 2013. The airline plans to retire all of its MD-80-family jets as it institutes a 80-percent systemwide capacity cut. (Photo: Flickr: Creative Commons (BY-SA) by redlegsfan21)

This story is part of AIN's continuing coverage of the impact of the coronavirus on aviation.

Varying priorities among U.S lawmakers in Washington, D.C. threaten to delay a bailout package promised by the federal government for airlines and aerospace companies, most notably Boeing and its suppliers. At press time, Congress still hadn’t passed legislation to address the need for financial help due to the effects of the Covid-19 pandemic, as one after another airlines either announced a complete withdrawal of service or severe cuts. Boeing, meanwhile, continued to burn through cash reserves as it watched its stock price decline by some 70 percent.

Much of the debate surrounds a $50 billion bailout package requested by the country’s airlines, whose liquidity crisis many blame on the fact that the industry spent most of its cash on stock buybacks last year. Nevertheless, in recognition of the vital role the industry plays in the economy, President Donald Trump pledged to place airlines “number one” in line for government support. He also expressed a desire to support Boeing, which asked for a $60 billion package, part of which would help support its supply chain.

The package of financial relief measures requested by trade group Airlines for America (A4A) includes a $25 billion grant for Part 121 passenger air carriers and a $4 billion grant for Part 121 cargo carriers to cover the same time period.

“The downturn in demand for commercial air transportation related to Covid-19 is causing unprecedented harm to the U.S. airline industry,” said A4A in a statement. “Net bookings for the next few months have been exceeding negative 100 percent as cancellations are rapidly outpacing new bookings [2 to 1 for some carriers], and trending worse each day.”

The group also asked for unsecured loans and loan guarantees as part of a voluntary facility program in the amount of up to $29 billion to address medium- to long-term liquidity needs.

Finally, A4A has called for tax relief in the form of a rebate of all federal excise taxes paid to the Airport and Airway Trust Fund from January 1 through March 31. It also has asked for a temporary repeal of all federal aviation excise taxes for Part 121 carriers imposed on tickets, cargo, and fuel through at least December 31, 2021.

Calling the situation “much worse than 9/11,” A4A has received liquidity projections from all its passenger-carrying members for mid-year 2020 and year-end 2020. Of two possible scenarios the group formulated, it called its pessimistic scenario—in which all seven of its passenger-carrying members run out of money by the end of the year—the more likely.

So far Delta Air Lines has announced a systemwide 80 percent reduction in flying, including a 90 percent cut in international available seat miles, while United announced an 85 percent cut in international service and a 42 percent cut in North America; finally, American Airlines said it would slash 75 percent of its international flying and as much as 30 percent of its U.S. service by May. Even JetBlue, which flies mainly domestic service, announced a 40 percent systemwide reduction.