Reading between the lines of a recent interview, Delta Air Lines CEO Ed Bastian is laying the groundwork for a second bailout to protect airline employees.
Delta CEO Ties Government Funding To Job Preservation, Hints At Second Bailout
Speaking to CNN’s Poppy Harlow, Bastian first clarified that Delta had not actually accepted an additional $1 billion loan from the federal government, just left open the option to do so.
“We’ve not made a decision to take the money. We’ve signed a term sheet with the Treasury Department to hold our opportunity to make a decision until the end of September. So we’ll decide in the next couple of months, but we haven’t made the decision.”
Why specifically mention end of September? That’s not just when the option expires, but when CARES Act funding to keep all employees on the payroll dries up.
Bastian was then asked that if Delta takes the money will he commit to no layoffs for a longer period of time. Harlow notes the conditions of taking the additional government money are different than the stipulations under the CARES Act (which prohibits any job terminations until September 30, 2020). She notes, “It obviously wouldn’t sit well with people to have job cuts.”
Bastian responded:
“I think that’s right. I think there’a a sensitivity that if you take the government the second truanch and then you turn around and use the money to fund a fairly significant reduction in staff, that would be something that airline would have to explain to the government as well as to its employees or community.”
Even though Bastian promises nothing, I’m not sure why he would even concede that point…unless he was angling for another forgivable infusion to pay employee salaries. The $1BN loan Delta is contemplating is certainly at better terms than a private loan, but not forgivable.
I read Bastian’s strategy to hold off for a second government infusion while dangling the prospect of cancelling planned layoffs in exchange. Furthermore, I think he is banking on public outrage over Delta taking another $1BN loan and then cutting staff. Why? Because the outrage would be directed more at the government than at Delta.
My Prediction: A Second Bailout Is Coming
Labor unions have already written to Congress asking for another round of protection so mass layoffs do not occur on October 1, 2020. Airlines 4 America, the powerful lobbying arm of major U.S. airlines also told Congress:
“It is our hope this money will be the bridge to the future we need, and we will not have to come back for more.”
Our hope? With airline demand once again taking a turn for the worst due to a recent upsurge in COVID-19 cases across the country, airlines are looking into slashing August schedules.
Do you really think the White House is going to want thousands of job cuts a month before the general election? I expect at least another three-month extension to CARES.
CONCLUSION
Airlines are still struggling and the new uptick in cases only makes it worse. The drumroll for a second bailout has already begun…it will only pick up steam from here.
image: CNN / Fair Use Exemption
That’s nice. Maybe the Delta CEO should be raising heck with Brian Kemp about the appalling public health situation in Georgia. Who is going to want to fly his airline when Atlanta is literally one of the most infected places on the planet?
@ Matthew– Screw Delta and all the other airlines. I hope Congress is not going to double down on failed bailouts. NO MORE BAILOUTS!
After taking money from the Cares Act, Delta has cut 25% of its employees salaries by forcing them to give up 25% of their hours.
Is this the same Ed Bastian who was the only “Big 3” CEO to refuse to attend the summit meetings held by President Trump in an attempt to address the issue of “unfair subsidies” and the resulting competition from gulf carriers? After, of course, being the loudest mouth on the issue?
But now he goes to the government, hat in hand, for taxpayer funded bailouts. Like many, he is only willing to take a political stand until it impacts his own pockets.
Sure, he can have a bailout when he, his cronies, and their families are forcibly required to discourage their entire wealth. Leave them penniless and destitute, then you can have a bailout.
They must DISGOURGE their net worth. Claw back everything.
In my dreams, Delta Air Lines and United Airlines and American Airlines all revert to being strictly domestic carriers, squabbling over who gets rights to Albuquerque and Colorado Springs and Jacksonville; just like when I was a kid.
So as a publicity traded company Delta will be sharing future profits with the government handing them even more money, right? Of course not. This hypocritical cronyism is both disgusting and pathetic, but Delta really does do those well. Practice, I guess.
Yes, there will be definitely a second bailout. But…the “CARES Act 2” will extend funding for just an additional 34 days. On the 35th day, then the WHO CARES Act (aka NOBODY CARES AFTER ELECTION DAY) will be hard to ignore.
Sorry Matthew but your understanding of Ed Bastian’s comments may be somewhat off-base in terms of a “second bailout”. The original CARES Act agreed to back in spring offered two items: a) direct funds strictly for payroll until Sep 30; and b) loans from Treasury. Airlines at that time did not need to commit to b), just show an indication that they may be interested. A few weeks ago, all airlines agreed to terms of the loan under b) but again, still have until Sep 30 to agree to whether they actually want to take the loan. That was what Ed was referring to. Again, this “second tranche” is part of the original CARES Act, and not a new round of bailout that some airline unions have been lobbying for.
Todd, that’s not what I meant at all. Bastian never mentioned a second bailout and I am well aware he was not referring to one when he said “second tranche”. Instead, he hinted at…at least that is how I interpreted his wait-and-see approach along with his comments about job cuts.