Airlines’ $58b bailout plea puts scrutiny on past in US

Bloomberg

Scott Kirby, the president of United Airlines Holdings Inc, described a “dire scenario” in which monthly sales would plunge 70% until the start of June, then 60% that month and 40% in July and August.
That outlook, it soon became clear, was too optimistic with the coronavirus pandemic destroying virtually all demand for travel. Airlines and their labour unions stepped up a push for $58 billion in US aid to weather a storm that has surpassed the 2001 terror attacks in terms of impact on the business.
President Donald Trump said he would back the industry “100%.” Airlines worldwide are making similar pleas for help as bookings evaporate.
The European Union said it is open to bailouts for the transport sector, while Virgin Atlantic Airways is said to have asked the UK for a multibillion dollar package for the airline industry.
Help in the US is needed because “this crisis hit a previously robust, healthy industry at lightning speed,” Airlines for America said in a statement. The trade group outlined a proposal for $50 billion for passenger airlines and $8 billion for cargo carriers.
But the request for taxpayer assistance via loans, grants and tax relief comes after a decade of massive consolidation — and billions in profits — that put the industry in a far more robust condition than before.
What’s more, from 2010 to 2019, US airlines spent 96% of their free cash flow, some $45 billion, to purchase shares of their own stock, according to data compiled by Bloomberg. The world’s largest carrier, American Airlines Group Inc, was the biggest buyer, spending $12.5 billion.
Share repurchase programmes aim to help boost share prices. And that effort — as opposed to using the cash to build up reserves — is bound to draw attention as the question of aid is debated.
One interested party, the Air Lines Pilots Association, which represents United pilots, said in a memo to members that it had recommended unsuccessfully during the good times that the airline build its cash reserves.
The pilots “will insist that any short-term impact and pain necessary to get through this crisis will be shared by all stakeholders—management, fellow employees, and vendors,” Todd Insler, the local president who is also a United director, said.
“In the future, there will be a time for a reckoning, blame, and restitution — I assure you of that,” he wrote. “For now, we need management to focus on the enterprise, and we need to work together to survive.”
The coronavirus has touched every part of the aviation industry, from the behemoths to Silver Airways Corp, a closely held airline in Florida with fewer than 1,000 employees. Silver, which flies turboprops in the Caribbean and Florida, wrote to administration and Congressional officials seeking “immediate and direct assistance.”
House and Congressional officials for short-term aid for itself, suppliers and airlines as the outlook for the travel industry worsens by the day, Bloomberg News reported. American and Delta Air Lines are in talks to arrange billions of dollars in new financing.
There’s no telling what even the immediate future holds: One potential worst-case scenario would be a government-ordered domestic flying ban to help stem the virus’s spread, with the world’s largest airlines shutting down entirely.