A note to Congress from America’s most prominent airline lobbyist helps us to understand why we experienced so many delays and cancellations in 2021: we just didn’t get airlines taxpayer money quickly enough. Oh yes, and security breaches.
How Airlines Are Defending Poor Operational Performance
The House Committee on Transportation sent a note to Nicholas Cailo, CEO of Airlines for America, the lobbying arm major of U.S. airlines, with a number of questions addressing the effectiveness of the Payroll Support Program (PSP) and probing why 2021 has been characterized by flight cancellations, delays, and even several meltdowns.
- How many U.S. airline employees were saved as a result of PSP grants?
- Approximately how many flights and how many points of service did PSP enable airlines to continue offering?
- Has any A4A member been informed, or there is a basis to believe, that such member has not complied with any statutory requirement attached to PSP grants?
- What approximate average percentage of payroll costs did PSP grants and loans cover?
- To what extent did carriers rely on early retirements and voluntary leaves of absence to weather the pandemic? Were voluntary separations necessary to enable airlines to remain solvent?
- What were the primary causes of the operational disruptions experienced by some carriers this summer? Were they a result of mismanaging PSP funds? What steps are airlines taking to avoid future operational disruptions like those we saw this fall?
- Are carriers experiencing workforce shortages? If so, why? Did these shortages play any role in operational disruptions this year? What steps are being taken to address these shortages?
- Please provide details regarding the amount of time and resources required to hire, train, and qualify flight and cabin crewmembers, mechanics, and other workers whom airlines may be hiring to address any shortages referenced in question 7.
- What steps are airlines taking to improve the passenger travel experience in the wake of the COVID-19 pandemic? To what extent did PSP grants enable airlines to take these steps?
(you can read the original letter here)
Cailo responded as expected, thanking Congress for PSP, arguing how effective it was, and defending the delays and cancellations as unfortunate but a foreseeable reaction to the global pandemic.
Unfortunately, the depth and duration of the airlines’ financial crisis combined with the temporary lapse in PSP funding in late 2020 forced several airlines to reduce payroll through a combination of layoffs during that two-month period as well as voluntary leaves of absence, early retirements and other forms of separation.
This undermined one of the key tenets of PSP for airline workers: people certified with credentials and qualifications cannot be laid off and come back to work the next day. Our highly skilled workforce needs to maintain their qualification because it takes months to re-qualify and certify them.
Cailo goes on to note several reasons why operational disruptions occurred:
- passenger demand that outpaced the predictions of any historical models
- extreme weather
- security breaches [no further explanation given]
- tight labor supply
- high rates of employee absenteeism
- fuel shortages
- supply chain issues “which are shared by numerous other sectors of the economy.”
But a question: if airlines cajoled many workers into voluntary separation packages or early retirement and knew they were short-staffed, why did they bring back service so quickly? Was it all just a hope and a prayer things would work out?
Cailo goes on to admit (though I doubt he would characterize it as an admission) that the manner in which airline PSP was sold was a farce. Recall we were told that PSP would save every airline job so that airlines could come bouncing back as soon as demand recovered.
Instead, Cailo explains another reason why there were delays and meltdowns this year is because PSP did not go far enough to cover airline payroll expenses.
Between April 2020 and September 2021, U.S. airlines received:
- $49.6 billion in PSP funds
- $35.6 billion in grants
- $14 billion in loans
During that time, those same airlines incurred $64.1 billion in payroll expenses.
Of note, those payroll expenses would have been much higher if not for the significant savings achieved through voluntary measures such as early retirement, voluntary separation and unpaid leaves of absence, enacted by many carriers….
[C]arriers had to take significant measures to preserve liquidity and avoid deeper cuts that would have been necessary in a potential bankruptcy proceeding.
Thus, the PSP package sold as a way to protect all aviation jobs only covered 55.5% of payroll, meaning airlines had no choice but to cut its workforce according to Cailo.
But telling U.S. taxpayers that does not sell as well as as a bright and shiny package that limits executive compensation or stock buybacks and prohibits airlines from furloughing employees.
And let’s not even get started on the fact that PSP covered airline employees only, not most contractors working for airlines…
There’s a lot of smoke and mirrors on display. PSP certainly saved jobs and made the airline recovery smoother than it otherwise would have been. But it came at a high cost too.
A $1.25 million annualized run rate per job ‘saved’. That has to be some sort of record for waste, fraud, and abuse right?
— gary leff (@garyleff) September 17, 2020
I’m not sure admitting that PSP was never enough in the first place and blaming summer meltdowns on insufficient taxpayer funding and unspecified “security breaches” is going to sell well.
I’m certainly not buying it…