Posted on 10/08/2020 5:54:51 AM PDT by Kaslin
Regal Cinemas announced recently that it will temporarily close all 536 of its U.S. locations as the COVID-19 pandemic rages on and continues to keep customers away. This move will affect approximately 40,000 employees across the country. And yet, nobody in Congress is talking about a bailout for Regal.
Now compare that with the airline industry.
The airlines received a $50 billion bailout in April of this year, with $25 billion in subsidized loans and $25 billion meant to keep most airline workers employed until the end of September. As predicted, since consumers weren't ready to fly yet, this taxpayer-funded Band-Aid only postponed the inevitable. American Airlines and United Airlines just furloughed 32,000 employees. Yet, in this case, most legislators -- from House Speaker Nancy Pelosi to a large number of Senate Republicans to President Donald Trump -- want to bail out the industry.
We're told that a new injection of taxpayers' money is about saving airline jobs. But it's hard to believe that this is really what it's all about. As mentioned above, nobody is talking about bailing out Regal to save its workers. Moreover, as my colleague Gary Leff and I show in new research published by the Mercatus Center at George Mason University, the math doesn't add up to support the arguments that a second airline bailout is about the workers. If the bailout were truly to support upwards of 35,000 airline employees for six months, assuming roughly $50,000 per worker paid out over that period (i.e., $100,000 annually), the bailout would only be around $1.7 billion, not the $25 billion package that Congress is talking about. What's more, if the bailout is indeed another $25 billion for 35,000 jobs, that would cost taxpayers $715,000 per job saved -- for only six months.
Bolstering the claim that this isn't about protecting jobs, much of the payroll support would give money to airlines that aren't furloughing workers to begin with. These points should put an end to the argument that the bailout is to prevent furloughs. But it doesn't. Airline representatives have argued that the bailout would not only be beneficial to freshly furloughed workers but also protect against the termination of workers currently on leave. Don't buy it.
First, there's no indication that airlines plan to furlough those workers. If they did, they would have had to notify them 60 days in advance of the furloughs, which they have not. Second, if the concern is that airlines might make additional, yet-to-be-announced furloughs, then that's an even bigger argument against payroll support. It suggests that the industry isn't expecting to do better anytime soon if they feel the need to furlough the on-leave workers who aren't costing them a dime.
As I said, saving jobs isn't the primary reason for this bailout. It never is.
It's also worth noting that some companies are taking a different approach to retaining their employees. For instance, Southwest is asking its labor unions to accept pay cuts to prevent furloughs and layoffs through the end of next year. Others, such as Singapore Airlines, have done the same. Airlines also have access to capital markets and have many durable assets that they can sell or use as collateral to secure additional financing, even during a crisis. And even without selling these lucrative assets, airlines can also turn to their co-brand credit-card-issuing partners for liquidity like they have during past financial challenges.
Sadly, as long as demand for air travel remains so deflated, there's no way to avoid airlines restructuring and slimming down their payroll. Subsidies provided through the cover of payroll programs aren't necessary to protect an industry that could restructure through bankruptcy. Airline bankruptcies aren't the equivalent of an airline collapse. They can continue to fly safely during the process where a judge imposes a stay on creditors' claims and gives the airlines breathing room until consumers are ready to come back.
Importantly, the bankruptcy process is fair. It shifts the cost of this crisis onto those airline investors who make good returns during good times and should shoulder the decreased value of their investments, instead of taxpayers. Without a bailout, airlines won't just be flying the friendly sky, but the fairer sky -- for all taxpayers, including Regal employees.
We need airlines.
We do not need Hollywood.
Unfortunately, if American based airlines go down, a foreign airline will fill in and take over the industry. Do you want that nation to be China or Russia?
Some industries need help to protect America.
The airline industry is heavily regulated. It’s one area the Chicoms can’t move in on. Yet, anyway.
Agreed.
However much we need and use airlines they will survive and reconfigure.
It is not as if we’re about to nuke every plane in the country next week if the feds don’t hand over $100B in additional bailouts.
They're being bailed out so they can fulfill their obligations to pay for all the new Boeing aircraft they have on order.
Charge me a third more to fly. Please.
But - BUT - increase seat width and legroom by 20%.
In-flight entertainment, to me, isn’t the latest movie. It’s having enough room to move my arms and legs without waking the passenger next to me. And vice-versa.
Hire flight attendants who... gasp... SMILE, and make passengers believe that their business is appreciated.
In short, treat your passengers like you would like to be treated.
Simple
I’m confused. How are 25 billion in loans a “50 billion dollar bailout”?
Who shut down our economy?
How’ are cruises, restaurants, bars, hotels, tourism, small businesses, entertainment, University town businesses, landlords doing?
I want to live some place where there is not a perpetual need for bailouts. Anyone know where that is?
An airline that files for bankruptcy/reorganization/protection from creditors continues to operate; it doesn’t stop flying.
Iceland.
It’s really expensive though.
“Subsidized loans” are a bailout.
Could not agree more!! And this mask madness has made it even worse. Flew with 2 kids in June, near empty flight, but they constantly lectured the 6 year old about her mask.
I used to fly 3 times a year across country. No more. I refuse to fly with a mask on.
We are no longer customers. We are potential terrorists infected with a deadly disease. The only thing worthy of us is a scowl.
I don’t see how in this specific case.
The government shut down the economy, and you
want to put that on the airlines?
The airlines are getting a loan from the exact same institution that caused the need for them to get a loan in the first place.
Do you have an issue with that?
There is zero reason to favor the airlines over all the small businesses being put out of business. Likewise, zero reason to favor airline employees over other Americans. Furlows are the right thing for the airlines to do and we should have had them take that step six months ago. There are far greater needs than what we already forked over to this industry.
We have already paid out trillions while throttling down the economy’s ability to generate nearly full tax payments. What we need to do is open the economy and let free markets adjust in response.
It is always a bad idea when the government plays favorites and props up big businesses—whether viable or vulnerable to creative destruction.
I’m not seeing a big connection between Regal Cinema and the airline industry.
I would think that the cinema industry would decline regardless of COVID. Weren’t a lot less people going out to the movies before COVID?.
And I get it, that’s your industry and everyone rationalizes special government benefits to their “specific case”.
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