As talks between the White House, Congress and America’s C-suite intensify with the spread of the coronavirus, the U.S. airline industry is poised for a bailout that will theoretically keep planes in the sky when the crisis is over.
While the size and scale of the coronavirus are unprecedented, the industry is no stranger to the legislative halls of Washington, D.C. After 9/11, the airline industry was decimated, seeing losses of roughly $34 billion.
Then, the airlines were given about $15 billion: $5 billion in aid and another $10 billion in loans spread out across every airline based on capacity. It only took 12 days for President George W. Bush to sign it into law.
Now, with the coronavirus expected to cost the industry between $63 billion and $113 billion, airline leaders and their powerful lobbyists are “optimistic” that the industry will be receiving help in some form.
But time is of the essence. The market is in free fall and airline stocks have tanked. Delta’s stock was traded for $60 a share in July and can now be bought in the low 20s at the time of publication. In a letter to his staff, Delta’s CEO Ed Bastian said that the airline’s revenue for March was down $2 billion already compared to last year, and April could be even worse.
“At the moment, the market is shooting first, asking questions later. Nobody wants to stick around and wait for the data,” said Stephen Trent, an analyst who tracks airlines for Citi Research. “The demand shock we’re seeing looks deeper than on Sept. 11, SARS or even the credit crash. This is sort of uncharted territory.”
On Tuesday, the airline’s trade group, Airlines For America (A4A), released a statement mapping out its requests to legislators, which consisted of more than $30 billion in immediate grants, $30 billion in loans and additional tax breaks. A day later, A4A released another statement calling what the industry is facing “worse than the financial and operational impact caused by 9/11.”
Before the coronavirus crisis began, airlines were on track to have a record year. “If you look at the big airlines in the U.S., they’ve had earnings of ten billion dollars last year. This isn’t a failed group,” Trent said.
According to A4A, airlines also support about 750,000 American jobs, and it’s hard to imagine a country the size of the U.S. functioning properly without air transportation. The same can’t be said for cruise ships, a purely leisure and recreation industry.
Even so, President Trump has said he’ll be helping everyone. The president muddied the water further earlier today, saying he’d consider the U.S. government taking equity in some of the companies that seek a bailout.
“We will be helping the airline industry, we will be helping the cruise industry, we will probably be helping the hotel industry,” Trump said.
Leaders in the hotel industry have already asked for roughly $250 billion in aid as Marriott is set to furlough “tens of thousands” of employees.
Even though Trump has been adamant that he’ll be taking care of the airlines, there’s currently a rift between what the airlines want and what they’ll be given. A majority of the White House’s proposal was in loans, not the grants that would provide immediate cash assistance, according to Politico. Also, no bailout will get through Congress without conditions, which may include cutbacks on carbon emissions and limits to executive bonuses.
Meanwhile, airports are asking for an additional $10 billion in relief and Boeing, which makes most of the planes U.S. airlines fly (including the troubled Max 8, which has been grounded for over a year) has also asked for a bailout.