Will the Airline Industry Get Another Bailout?

Layoffs are expected to begin Oct. 1 unless the Payroll Support Program is extended

Airlines received billions in federal funds early on into the pandemic, but it hasn't been enough. Photo Illustration: Dianna McDougall; Sources: Getty Images

Before they were given more than $25 billion in March, airline executives warned Congress that if it didn’t act quickly, the industry would see unprecedented layoffs as travel restrictions sent demand plummeting.

“Time is running out,” they wrote roughly 10 days after the NBA suspended its season and more than 1,000 Americans tested positive for Covid-19. “The worker payroll protection grants are critical to saving the jobs of our employees. … Unless worker payroll protection grants are passed immediately, many of us will be forced to take draconian measures such as furloughs.”

Within four days, help arrived. 

For the most part, the airlines were given exactly what they asked for. In exchange for the Payroll Support Program (PSP), a mix of grants and loans totaling nearly $50 billion, airlines were forbidden to lay off any staff through Sept. 30. The funds effectively worked as triage to stem the bleeding of the country’s ever-rising unemployment numbers.

“The idea at the time was that things are going to get back, but then [the recovery] is going to be V-shaped,” said Brett Snyder, an airline expert and the author of the industry blog Cranky Flier. “Airlines are critically important to the country for an economic recovery—let’s provide a bridge over that V and get them to the other side.”

But now that deadline is getting closer, and demand hasn’t recovered. The airline industry is about to shrink—most are seeing revenues fall 80% year over year

Layoffs were always inevitable. But representatives of airline employees argue that an extension of the PSP could limit the suffering—more triage—until a vaccine can be devised, which is expected to happen early next year. Unions representing airline pilots, mechanics and flight attendants have lobbied for an extension that would move the deadline to March, throwing the industry a federal lifeline for a full calendar year.

“If we are to build an economic rebound for this country, we must protect the jobs of the frontline aviation workers who will help lift up the rest of the economy,” the Association of Flight Attendants said in a statement. “As the pandemic persists and even intensifies in some regions, additional investment is needed in workers and an industry that forms the foundation of our economy. We need to extend this historic workers-first program now, or hundreds of thousands of workers could lose their jobs.”

TSA figures show the travel industry is beginning to rebound, albeit incrementally. On Sunday, 831,789 travelers passed through U.S. airports, the most since March. But that’s still less than a third of the number of travelers at the same time last year. 

Stimulus talks between the White House and Congressional leadership have stalled, but President Donald Trump has signaled that the airlines are a priority. Sixteen Republican senators have also signaled that they support additional funds. A bipartisan letter signed by 223 members of Congress emphasized the importance of a clean extension. 

“With the resurgence of Covid-19 in several states across the country and a vaccine for the virus yet to be developed, passenger demand for air travel will not recover before the PSP expires on Sept. 30,” the letter read. “Without an extension of the PSP before then, hundreds of thousands of airline workers will be fired or furloughed on Oct. 1.

“To save nearly 1 million airline industry jobs, we must extend the PSP through March 31, 2021.”

Delta CEO and president Ed Bastian supports a clean extension, though during the airline’s first-quarter earnings call, he doubted there was adequate political “appetite” for additional relief. The Wall Street Journal reported that American Airlines CEO Doug Parker met with lawmakers last week, and that United’s Scott Kirby was also “involved” in talks.

“I was personally involved in crafting the PSP, participated in many meetings and phone calls leading up to the Cares Act’s passage and implementation,” Southwest president and CEO Gary C. Kelly said in an internal video message to employees. “From the beginning of that legislative effort, there was broad support from Congress, the administration and even the president. This time around, that’s not the case.”

Although no executive would wave off free money, Kelly has already told his employees that Southwest would not lay off employees, in line with its history—the airline has avoided layoffs since its inception in 1967. It’s also the only airline currently advertising on television.

“Of course, we support our unions and their efforts for this clean six-month renewal of PSP, and we’re in lockstep with our industry organization Airlines for America in support of the labor unions efforts,” said Kelly. “Just as before, I am personally involved in delivering that message to our federal leaders.”

American has warned that 20,000 employees could lose their jobs this fall. United expects to cut 36,000 employees. Before October arrives, airlines are hoping their employees will take voluntary leave or early retirement packages. Already, 41,000 American Airlines employees have opted for a package. 

The unions are doing what’s expected of them, Snyder said. But without the immediate fear of bankruptcy, airlines are beginning to understand that more lasting change to their companies will be necessary.

“They see the carnage here,” he added, “and realize that there are going to be structural changes required.”

@RyanBarwick ryan.barwick@adweek.com Ryan is a brand reporter covering travel, mobility and sports marketing.