In what world does someone demand money from someone else, get it, and then bitterly complain that it is unfair when asked to pay a small portion of it back? But listening to airlines and unions, which have suddenly joined forces, you’d think that U.S. taxpayers were fleecing airlines. In reality, the opposite occurred and efforts to make that bailout less egregious should not be a rallying cry against the very people who were so generous in the first place.
U.S. Converts A Portion Of Grants To Loans
Under the CARES Act, the Department of Treasury is authorized to take equity stakes in airlines in exchange for grants to airlines. In negotiating with airlines for final aid packages, Treasury Secretary Steven Mnuchin invoked this authority to wisely shield a portion of taxpayer money.
The terms are hardly egregious to airlines. Quite the contrary, they remain generous.
U.S. airlines initially thought they would receive exactly what they asked for: $25 billion in free money to meet payroll obligations through September 30, 2020. Instead, they will receive $100 million in unrestricted grants then be asked to pay back 30% of payroll grants above that amount in the form of low interest loans. As a loan guarantee, the U.S. can take equity warrants for 10% of the value of the loan.
So again, 70% will be free, 30% will be paid back at enviably low interest rates over time.
Sounds like a great deal to me…heck, I’d call it the deal of the century.
Airlines + Unions + Democrats Cry Foul
But airlines, and especially airline unions and lobbying groups, are crying bait and switch and making dire warnings.
Airlines for America, the lobbying arm of most major passenger airlines in the USA, was at least diplomatic in expressing criticism over Mnuchin’s bargaining:
“Direct Payroll Assistance funding in the form of grants only is considerably more effective for our employees rather than a hybrid combination of instruments
“This federal relief is critical to getting our employees paid and preventing furloughs right now, especially as our country is experiencing historically high unemployment claims.”
In a joint letter to Mnuchin, various airline unions warned of imminent collapse absent swift disbursement of funds with no strings attached:
“If the payroll grants are delayed any further, our colleagues across the industry will lose their jobs and our aviation industry will collapse.”
Sara Nelson, President of the Association of Flight Attendants, added:
“This is not free money to the airlines, it’s money that is intended to keep people on the job and their paychecks going…
“…the Treasury Department is destabilizing the industry, not helping save it.”
She added that converting grants to loans “will lead to airline bankruptcies.”
Nelson is making this a partisan issue, laying the blame on Mnuchin and President Donald Trump:
More than 6.6 million people filed for #unemployment in the past week. 10 million in two weeks. Now, @StevenMnuchin1 and @realDonaldTrump are on the brink of personally signing pink slips for a million or more aviation workers. Tell them NO #COVID19 1/12 https://t.co/uYEGxCvO3z
— Sara Nelson (@FlyingWithSara) April 2, 2020
Nelson hopes a Biden Administration would be more favorable to airline unions and is using the COVID-19 as an electioneering tool (she is hardly unique in that respect, just watch the President’s daily press conference…).
Even Democratic U.S. Senators like Senator Edward Markey (D-Mass.) and Richard Blumenthal (D-Conn.) have blasted Mnuchin, writing:
“Even if airlines accept relief funding with these conditions, each company’s ability to preserve its workforce will be imperiled when the Treasury Department later demands repayment, leaving employees to ultimately pay the price.”
That’s rich from people who routinely decry corporate welfare.
These Complaints Are Out Of Touch With Reality
Airlines and airline unions are totally out of touch with reality. Obviously, I understand why they have staked out the positions they have. There will be dupes that will buy into the narrative that “free” cash aid to airlines is necessary. But can you imagine being given $17.5 billion in direct grants and $32.5 billion in low-interest loans then complaining about it?
This is a direct wealth transfer…if it were my business on the receiving end, I’d shut up and say thank you, not complain that your initial bargaining position (pulled out of thin air) was mostly met, but not fully met.
Thank you Treasury Secretary Steven Mnuchin for not caving to pressure to just send the money. Because it’s not just money, it is your money and my money. It is my son’s money and my grandchildren’s money, since they will be paying interest on this U.S. debt.
And to airlines and airline unions, how dare you complain about so generous a package that was unnecessary in the first place…
image: U.S. Treasury Department