MIAMI – The five major US airlines are requesting US$50bn more from the government to survive the COVID-19 crisis as authorities consider various ways to support the industry.
Following the Centre for Aviation (CAPA) statement about worldwide airlines being bankrupt in May if governments do not help them, Airlines for America (A4A) made a proposal on Monday for a bailout package that includes grants, loans, and tax relief to help the industry.
US President, Donald Trump said on the same day A4A’s statement came out that the government had told companies that it was going to help them because it simply had to back the airlines.
Due to the 70-80% traffic decline, aircraft fly at only 20-30% capacity, said A4A’s President and CEO, Nicholas E. Calio in a statement. As a consequence, carriers are making cuts in capacity and in payment for workers, but the CEO warned that “this is getting worse each day with no end in sight”.
“We commend President Trump’s unwavering commitment to protecting the health and well-being of the American people and appreciate his efforts to support the US airline industry,” added Calio.
Meanwhile, the President of the Association of Flight Attendants-CWA (AFA-CWA), Sara Nelson, claimed that any US government bailout package will come with “strict rules” as the association had request to Congress.
The rules, according to Nelson, must include, “requiring employers across aviation to maintain pay and benefits for every worker; no taxpayer money for CEO bonuses, stock buybacks or dividends; no breaking contracts through bankruptcy; and no federal funds for airlines that are fighting their workers’ efforts to join a union.”
High number concerns
A spokesperson for A4A said carriers have invested 73% of their operating cash flow in investments in new aircraft, facilities, grounding equipment, and technologies, reducing their debts by US$91bn. Further, they have increased employee wages by 41% from 2010 to 2018.
With the gravity of the coronavirus crisis for commercial avition, the US industry expects a “collective burn rate” of US$10bn per month, added A4A’s spokesperson.
Expenses on investors
Delta (DL), American Airlines (AA), United (UA), Southwest (WN) and Alaska (AS) are requesting some monetary help, as they have paid over US$45bn to shareholders and executives in the last five years with no cost-saving concerns, according to research by The Guardian.
The numbers show that the carriers have spent 96% of their free cash flow on buying back their own shares, as reported by Bloomberg.
The research also shows that DL spent US$13.6bn on share buybacks and dividends (2015- 2019) and $208m in executives’ pay (2014-2018). AA spent US$12.6bn on dividends and buybacks and paid its executives US$177m (2015- 2019). WN on its part spent US$8.7bn and US$97m in pay to its executives (2015- 2019).
In addition, UA spent US$8.4bn on share buybacks and paid executives US$186m (2015- 2019). Finally, AS spent US$1.6bn on buybacks and dividends and paid executives US$71m (2015- 2019).
With the current airlines’ collapse, at least 750,000 jobs are at risk. In the prior five years, the five major Us airlines have reduced 10,000 jobs, according to the Challenger, Gray & Christmas firm, with DL announcing 4,325 job cuts; UA 3,325, AA 2,147, AS 170 and WN 118.
In Europe, several airline companies are requesting governmental aid and others are being helped by authorities as a direct emergency bailout was demanded by UK airports that are now dealing with zero passenger traffic.