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Just last week, I wrote about the possibility of airlines going bankrupt as early as May 2020. Airline and hotel industry executives approached government for the possibility of bailing them out. It seems like that may be happening soon. Airlines may receive up to 60 billion dollars in bailout funds.

US Airlines getting a bailout

Last week, I wrote about how a possible bailout would reignite the income inequality debate in America. Looking at the contents of the bill, it seems like there’s been some effort made to address the concerns of the ordinary worker. Business Insider outlined some of the details of the bill. Here are a few key points that stand out. You can read the full report here.

  • The Senate package offers $58 billion to US airlines, which is further broken down evenly as payroll grants and loans.
  • Airlines that receive a bailout will not be allowed to do stock buybacks and share dividends up to at least 1 year after they pay back the loans. It also puts caps on executive compensation akin to 2019 levels. However, the article highlights one key point that offers wiggle room for airlines.

This provision can be waived by the Treasury Secretary if deemed “necessary to protect the interests of the Federal Government”.

  • Boeing may receive a large chunk of up to $17 billion in loans, as it has been classified as a company that’s “critical to national security”.
  • Companies receiving these loans will have to protect jobs and cannot lay off or furlough workers until September 30, 2020

The Pundit’s Mantra

While in theory, this looks to offer protections to airline workers and avoid job losses, there are a few interesting things that stand out. Firstly, airline CEO pay is already very high, with the CEO of American Airlines making over 190 times the average AA employee. Secondly, the moratorium on lay offs and furloughs is until August 31, 2020. If the crisis lasts longer (which I sure hope it doesn’t), we don’t know yet how airlines would respond in such a case.

For example, United had already warned last week that it would lay off more than 50% of its employees if the government doesn’t step in and bail it out. Don’t forget that United has probably been the least customer friendly US airline when it has come to offering fee waivers after the Covid19 crisis broke out.

After passing the Senate, the bill will now head to Congress for a vote on Friday.

Do you think the proposals outlined in this bill do enough to address the problems of airline workers and staff? Let us know in the comments section.


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