American Airlines has threatened to cut service to “up to” 30 smaller cities if federal aid, slated to expire on October 1, 2020, is not extended. Is this a serious threat or a simply a ruse to pressure more lawmakers to support another bailout?
A Ruse From American Airlines?
American approached CNBC for its leak, a leak that is tremendously speculative at best.
The new cancellations for up to 30 destinations could show up in fall schedules as early as next week, the American Airlines executive told CNBC. The person asked not to be identified because the changes haven’t been finalized yet. The executive didn’t say which cities could be cut.
So “up to” 30 destinations “may” be cut from the schedule “as early” as next week but we can’t say which ones because they haven’t been “finalized” yet.
Queue up Katherine Estep, a spokesperson for Airlines for America, the lobbyist group for U.S. airlines. She told the AP:
“Demand for air travel has not returned as anticipated. Without additional federal aid, U.S. airlines will be forced to make very difficult business decisions, which could include announced furloughs and reductions in service.”
People thought I was too harsh on Delta CEO Ed Bastian earlier this week, but I know he was just doing his job. Here, the AA executive who leaked the information was just dutifully following orders. So is Estep.
But in a week in which we’ve seen United embrace leisure traveling to Florida from non-hubs, I would never go so far as to say that American Airlines is just bluffing. Posturing? Of course. But I predict all airlines will cut service to small cities if CARES 2 does not include more handouts to airlines. This will happen for two reason.
Two Reasons This Likely Isn’t A Ruse
One, because demand isn’t there. Despite promising figures from TSA this summer in terms of passenger numbers, traffic is still down 70% this month compared to August 2019. As the summer draws to a close and business travelers remain grounded, airlines will face an even more difficult situation this autumn.
Second, airlines will “punish” Congress if another lifeline is not extended. Imagine an incumbent defending the loss of air service to her district because she was so “shortsighted” as to not give the airlines a little more room to breathe. This second reason is why I believe this is all pageantry and no vulnerable Democrat or Republican are willing to put their re-election in jeopardy by “allowing” job losses and service cutbacks a month before the election.
American Airlines is making the most of this environment to pressure Congress to extend aid. Expect other airlines to do the same. And if aid is not extended, expect service cuts to many smaller airports (though I don’t expect the cutbacks to be as severe as AA is now threatening).
image: American Airlines