To Stay Aloft With Federal Aid, Airlines Must Keep Flying
Airlines are slashing service, canceling hundreds of flights a day as the number of people traveling on planes plummets. And the numbers from just the past month are stark. The TSA screened only 146,000 people at airport security checkpoints across the country on March 31, down 93.5% from the almost 2.3 million screened on March 1.
Arriving at Reagan National Airport in Washington on Tuesday for a flight to Newark, N.J., Greg Weinman expected to see at least a few other people. Instead, "It's empty. It was eerily quiet. There was nobody in the security line," he says.
As a volunteer medical courier, Weinman's travel is essential, and he says it was surreal walking through the airport with everything closed up.
"There are no food options in the airport; all the restaurants are closed," Weinman says, adding "One of the bars I noticed all of the chairs had been wrapped in saran wrap."
He says he saw only about a dozen other travelers waiting in a gate area. At his gate, he was alone. He boarded and was able to sit anywhere he wanted in first class.
"I thought I was going to be the only passenger on the plane," Weinman says. "At the very last moment, another woman wearing a face mask walked onto the plane as well, but the crew still outnumbered us five to two."
When airlines are paying more people on the plane than are paying them, the economics of commercial aviation no longer work.
"The cash crunch is real, and it's made worse by flying cash-losing flights," says former airline executive Robert W. Mann, who is now an industry consultant.
So taxpayers are throwing the drowning airlines a $50 billion life preserver; half of it in the form of grants to keep employees such as pilots, flight attendants, mechanics and gate agents on the payroll. The other $25 billion is for loans.
The Treasury Department encourages airlines to apply for the aid by Friday, otherwise that financial assistance could be delayed.
But to get the money, there are conditions: The airlines must maintain their workforce at its current level, and they must keep flying to every U.S. city they served at the beginning of March, before the coronavirus outbreak kept people at home.
That could lead to flying even more empty planes.
The airlines had pitched the idea of consolidating flights, so instead of each airline flying their own nearly empty planes from Chicago to L.A., for example, all the airlines would sell tickets for one pooled passenger flight. So everyone buying a ticket for that route on American, Delta and other carriers might all fly together on one United plane.
But the Department of Transportation rejected that level of airline cooperation, citing antitrust laws.
"But I think what the DOT order provides is far greater flexibility," says Mann, because "it allows the airlines to consolidate within their own operations."
If an airline serves a city fewer than five days a week, they would be allowed to reduce that service to just once a week.
If the airline flies to a city multiple times a day, five days a week or more, they could consolidate those flights into just one trip a day from one hub airport.
For example, Mann says an airline that has several flights a day between Albuquerque, N.M., and several other cities such as Chicago, Dallas, Denver, Los Angeles and Phoenix could cut that back to just one flight between Albuquerque and one of those five cities.
"You can literally go from that 25 or 30 flights a day to Albuquerque down to one," Mann says. "How much more flexibility do you want than that?"
Another condition is that the government may take an ownership stake in the airlines in exchange for the grants and loans.
"It's kind of a form of nationalizing the industry," says Helane Becker, senior airline industry analyst and managing director at investment bank Cowan.
She points out that the federal government has done this before when bailing out AIG and two of the Big Three automakers in the last financial crisis.
"The government and taxpayers are going to help the industry buy a lifeline and they should get something ... they should be compensated," Becker says. "If I lend you money, I expect to get a return on my investment. And I expect that you will pay me my money back with interest."
But even with the federal aid, she doesn't expect the airline industry to come roaring back. She is forecasting a long, slow recovery, in which it will take business and leisure travel two to three years to come back.
"We think it will be 2022 or 2023 at the earliest before we could see anything like a normal year," Becker says. "And the industry's going to be a whole lot smaller."
So the government aid package for airlines may prevent job cuts and employee layoffs now, but may just be delaying them until October.
Despite the mandate to keep flying, President Trump suggested Wednesday that the administration may impose mass restrictions on domestic air travel, or at least between cities that are coronavirus hot spots.
"We're thinking about doing that," Trump said at the daily White House briefing.
But the president sent mixed messages on the issues, adding that he worries about the impact flight restrictions would have on the already struggling airlines, calling it "an industry that is desperately needed."
On the one hand, he seemed to suggest that he was looking to temporarily ground all domestic flights, saying, "We're looking at the whole thing because we're getting into a position now where we want to do that, we have to do that"
But later in the briefing he suggested he intended more limited restrictions.
"I am looking where flights are going into hot spots," Trump said. "Closing up every single flight on every single airline, that's a very, very, very rough decision."
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