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Home  >  Editorial  >  Editorial: Out-Of-Touch Airlines Whining About Generous Taxpayer Aid Is Appalling
Editorial

Editorial: Out-Of-Touch Airlines Whining About Generous Taxpayer Aid Is Appalling

Matthew Klint Posted onApril 14, 2020April 14, 2020 19 Comments

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.

CONCLUSION

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

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About Author

Matthew Klint

Matthew is an avid traveler who calls Los Angeles home. Each year he travels more than 200,000 miles by air and has visited more than 135 countries. Working both in the aviation industry and as a travel consultant, Matthew has been featured in major media outlets around the world and uses his Live and Let's Fly blog to share the latest news in the airline industry, commentary on frequent flyer programs, and detailed reports of his worldwide travel.

19 Comments

  1. Darin Reply
    April 14, 2020 at 11:25 am

    The loan will be long paid before your children’s children are going to need the money. Lower your high horse just a little. That being said, the airlines should be using the market to raise funds as a first resort. The airlines have all been a little one dimensional in their problem solving.

    • Matthew Reply
      April 14, 2020 at 11:26 am

      I’m not talking about the airline loans, I’m talking about the U.S. government loans to secure the money for the airline loans…

  2. Stuart Reply
    April 14, 2020 at 11:28 am

    As a small business owner I would love the same. All WE have so far is a dysfunctional plan that has everyone wondering how when and what. Further, unlike the airlines, we want to use it to bridge our payroll to the point we can be fully operational and never have to furlough anyone. The airlines want to use it and end up laying off half their employees come mid-September anyway.

    Self-entitled and greedy is an understatement.

    • Aaron Reply
      April 14, 2020 at 3:03 pm

      Tell me about it. As an independent grocery store owner, I have been hit hard! I find myself going whole days without food, water, or bathroom breaks just so I can keep the lines moving. Airlines have unions to fall to and use as a bargaining chip when they want something, but us small business owners get taxed higher and receive basically nothing. Not to mention, we take the brunt of businesses being seen as greedy and evil.

      If only we had someone to fight for us… Oh wait, we’re not big enough to afford to lobby, we’re not large enough in numbers to swing votes, nor are we feeble enough to accept everything being said to us.

      • Ron Williams Reply
        April 14, 2020 at 5:35 pm

        You guys have every right to be angry. There was no reason in the world to give this money to the airlines who have lived high on the hog for years, used their excess funds for stock buy backs, etc. Every major airline went through bankruptcy since the great recession and they could certainly do that again.

      • Stuart Reply
        April 14, 2020 at 6:18 pm

        @Aaron. It’s really true. With no substantive lobby or voice into the Govt. we are pushed to the lower tier of anyone giving a damn. These criminal airline executives, and now Boeing, get the administration’s ear and are offered soft landings for anything that goes wrong.

        What do we get? A screwed up program that gives me 8 weeks of pay for my 25 employees? That’s even if we ever see it!

        And the airlines get almost six months? Including Captains making freakin $350K annually? With the airlines basically saying they will STILL have significant layoffs in September?

        Not only do they take our legroom and devalue our points. The sons of b&tches now want to come in our home and take our money.

        I am with you, Aaron. With no signal or idea that there is any money coming soon from the SBA programs we filed for I am now paying out of my pocket starting next payroll to save the indignity of my staff filing for unemployment. And these airline executives are complaining? I defended a rescue at first. Now? They can file bankruptcy, get new leadership, stop paying employees absurd union driven senior wages where Captains make $350K, stop taking outrageous payouts, and stop paying entitled senior flight attendants who don’t give a hoot $100K to complain in the galley. Maybe then they could actually start over and serve their customers better. What a novel idea!

        Enough. I dare any airline employee making over a $150K to come here today and tell me your plight is, “woe as me.” Go visit Aaron and see what real leadership is. What real business is. What really drives the economy. And what a true struggle is.

  3. Gene Reply
    April 14, 2020 at 11:49 am

    @ Matthew — These recent moves have to be about the only thing Munchie has ever done with which I actually agree. Scary.

  4. Ryan Reply
    April 14, 2020 at 11:53 am

    The CARES act was nothing but false hope. That is why the airlines are pissed. They should have maxed out salary pay outs. Pilots making $350K per year are going to get their full salary and since they are on the top of the list , they will not get furloughed. My airline says the amount of money we will get is not even close to enough to cover payroll and we will be forced to furlough… I’m confused because originally I thought furloughing or reducing pay is not allowed. the whole thing is a joke and airlines are livid because of the bureaucratic mess of confusion. the gov’t says one thing, then does another. The rich pilots at the top keep everything and will not fly, the poor guys at the bottom will be furloughed or end up commuting to reserve and paying for hotels rooms not to fly. It is a very bad system.

  5. Shawn Reply
    April 14, 2020 at 11:56 am

    Matthew am I understanding correctly the issue is the airlines, after groveling and accepting funds, are now complaining about the stipulations of receiving said funds? And so Mnuchin is basically saying fine, if we can have any equity you can pay back more of the loans?

    I guess I’m confused as this is an act of Congress. It’s a legally binding document. So why don’t we tell them to then F off then and we’ll take equity in your company like you already agreed to?

    I cannot stand this administration but I agree with them on this point. With that being said, the dems are right. It’s the workers who will be punished if any extra repayment is needed. The golden parachutes will still be in effect and the workers will suffer as usual.

    • Matthew Reply
      April 14, 2020 at 3:26 pm

      Agree on your latter point and I am confused as well. It’s not like Mnuchin is going around the law…he’s merely enforcing it. I’m disgusted by Sara Nelson in particular, who is just a partisan hack in the same vein as the current White House occupant…

    • Stuart Reply
      April 14, 2020 at 6:25 pm

      For the SBA grant at our small business the cut off of any aid is for a salary under $100K. And you are worried about the “workers” at the airlines who are making over $200K, often over $300K because of seniority and Unions? Please.

  6. Ryan Reply
    April 14, 2020 at 12:02 pm

    Shawn, you are right in some ways. Keep in mind the act was designed to protect Pilots and Flight Attendants, so if you say F’em, we lose our jobs. I do think the airlines are looking hypocritical right now but at the same time, they did do what they could to create a viable money making business. No other industry on Earth operates with as high costs and low margin with thousands of highly skilled workers carrying peoples lives in their hands. This is an extraordinary situation and I am not saying the airlines are correct in their behavior but they do need assistance to keep ready to restart the transportation infrastructure. I really think they should have placed a max payout per pilot in the bill. Some will be taking home $33,000 per month… that is ridiculous. My line guarantee is $3100 per month at 75 hours…. they will have to furlough 10 low seniority first officers to hold on to 1 captain. I myself would take a small pay cut (and will) to keep jobs below me intact.

    • Shawn Reply
      April 14, 2020 at 12:13 pm

      Ryan thanks for explaining. That was helpful. And I agree with what you are saying. It’s definitely a tough situation and I feel for you. I think many don’t understand the field because they don’t go out of their way to explain it to their customers. I think AS tries, maybe SW. but there has to be a solution to the industry not always looking to the gov during hard times.

      • WR2 Reply
        April 14, 2020 at 12:46 pm

        Why should aviation employees be shielded from layoffs? Demand will be down a long time, so why should taxpayers pay these employees to do nothing? Why are they more special than the 10M+ who recently lost their jobs? Congressional dems tried to hand out money to their union buddies, but Mnuchin thankfully has some say in it.

    • Stuart Reply
      April 14, 2020 at 2:09 pm

      @Ryan. Maybe the “high costs” you mention are directly related to senior pilots making $350K a year. Which is insanity to me. Even you seem to agree. As well as the corporate bonus structure to executives. I hope this ends this once and for all so that maybe airlines could now actually afford to provide a better product, not run so close to the bone, and not need taxpayer bailouts every time there is a crisis.

      Emirates, Etihad and Qatar seem to have no problem attracting exceptional pilots with captains making in the $100’s and flying more hours. Perhaps we should open the door to foreign pilots being able to fly for U.S. carriers like they do. It seems that if there is such a shortage here that leads Captains to be able to make anything more than mid $100’s there is something really wrong with the system. It’s actually obscene. And to know that taxpayers are now covering for these grotesque pay structures is even more infuriating. And don’t get me started about senior flight attendants making $100K to play candy crush in the galley for hours.

      Meanwhile, what’s the average salary of first responders? Who not only risk their lives each day but also “carry so many lives in their hands,” as you call it.

      Not upset at you! Just the system. And how your industry gets these bailouts with such grotesque wages and corporate bonuses while the rest of us with small businesses that are the backbone of this nation suffer and wait for a lesser package that sits in a complete state of turmoil.

  7. Ryan Reply
    April 14, 2020 at 1:31 pm

    Most those who lost their jobs are going to get unemployment anyway… they will make more than me. Pilots need to stay on the payroll/stay trained.

  8. Santastico Reply
    April 14, 2020 at 2:59 pm

    Let them all fall apart. By far the most obnoxious executives in any industry.

  9. Jake Reply
    April 14, 2020 at 7:11 pm

    Let them go bankrupt and people can use the stock share certificates as TP. Let them cram more seats into their empty planes and take out the restrooms.

  10. Jackson Aimson Reply
    April 15, 2020 at 2:17 am

    What about individuals, small businesses, Amtrack, the Kennedy Center, Hospitals and States, are they not out of touch if they would be upset about having to repay stimulus checks, unemployment, forgivable loans and grants because of a government ordered shutdown?

    Airlines are no different than small businesses who are struggling because of government interference (necessary) in the market place. Why should small businesses not have to pay back and give equity stakes to the government when they didn’t plan or have adequate capital to tide them over? That’s the ridiculous argument being used on the airlines.

    The people we should be worrying about least are the flight attendants of the big 3 who earn excessive union wages and benefits. They are known to overall provide very poor service compared to their counterparts on European, Middle a Eastern and Asian Airlines.

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