In a leaked video, United Airlines CEO Scott Kirby told employees that they need to lay the groundwork for future government bailouts.
U.S. airlines received $54 billion in direct taxpayer cash during the pandemic, along with $25 billion in subsidized loans, tax relief, and payments to commercial partners that often wound up back in their bank accounts. For instance the subsidies that went to the Dallas – Fort Worth airport mostly translated into lower landing fees for American Airlines.
The airline industry was born in subsidy, totaling hundreds of billions of dollars, and bailouts have come and gone. Twenty years ago Doug Parker’s American West was bailed out by the Air Transportation Stabilization Board and then acquired US Airways which was also bailed out by the ATSB, and Parker went on to lead the effort for a pandemic bailout. The major U.S. airlines claimed to be against bailouts, before they were for them.
Taxpayers were promised that U.S. airlines would use the money to keep all employees on, so that the carriers would be ready to fly when travel returned. Only they didn’t do that. They spent money specifically to encourage employees to terminate their employment. At American they paid pilots to stay home, rather than spending the money to keep them trained. And U.S. airlines didn’t have the staff to support the schedules they wanted to fly to meet customer demand this year.
Still, those same airline CEOs expect to come back for more when the time is right. United Airlines CEO Scott Kirby told employees, in a video recording reported on by Matthew Klint, that airline bailouts will always be there – but unlike during the pandemic, they may not be there for every airline. It’s important to be profitable enough to be at the front of the line for the government trough.
[I]n a crisis, if the crisis is bad enough, history has shown us that national governments all around the world will support their airlines and make sure they can fly through and be there on the other side of the crisis. The reason is because we’re a critical part of the infrastructure and they have to have us. They need us there on the other side.
…there are times that governments will let two or three airlines fail if there’s a crisis because they don’t think they’re going to need all the airlines. So it’s important – it’s the old bear analogy, you want to be faster than the other guy.
In a sense United’s Kirby is just modeling Delta, and not for the first time. Last year Delta Air Lines CEO Ed Bastian, speaking at the Alliance Bernstein 37th Annual Strategic Decisions Conference, argued that airlines are investable because the government will always bail them out. At forty-seven minutes and 59 seconds in, explains:
My hope is that we’ve tested at Delta at least the proposition ‘are airlines investable’ and I think the strong answer is ‘yes they are investable’. And even in the worst crisis imaginable we’ve proven ourselves. We’ve proven the value of what we bring to society. We’ve proven that governments will be there for us if ever needed again, hopefully never again.
In their candid moments the big U.S. airline CEOs know that they spend a lot of money to have good friends in Washington, and when it matters to them the investment will pay off. In those moments events will be moving too quickly for you to do anything about it, either. As former Congressman Jim Moran (D-VA) said about the rush for federal spending after 9/11, “It’s an open grab bag, so let’s grab.”
