Airlines seek $58 billion in aid for business lost to pandemic

Request follows announcements of flight cutbacks by individual airlines

A Delta Airlines jet takes off behind the air traffic control tower at McCarran International Airport in Las Vegas in August 2019.  (Bill Clark/CQ Roll Call file photo)
A Delta Airlines jet takes off behind the air traffic control tower at McCarran International Airport in Las Vegas in August 2019. (Bill Clark/CQ Roll Call file photo)
Posted March 16, 2020 at 2:27pm, Updated at 6:59pm

U.S. airlines on Monday asked the federal government for nearly $60 billion in aid as passengers stay home to avoid the COVID-19 pandemic.

Airlines for America, an industry group, said in a memo that the passenger carriers need $25 billion in immediate grant assistance to compensate for reduced liquidity. The association has also requested $4 billion for immediate grant assistance to cargo carriers.

It is seeking an additional $25 billion in zero-interest loans and loan guarantees for passenger airlines, with a further $4 billion in equivalent loans and loan guarantees for cargo airlines. And it seeks tax relief from 2020 excise taxes and for taxes on tickets, cargo and fuel through December 2021.

After Sept. 11, by comparison, airlines asked for $24 billion in aid. They got $15 billion — $10 billion in loans and $5 billion in grants.

“This is a today problem, not a tomorrow problem,” said Airlines for America CEO Nicholas E. Calio. “It requires urgent action.”

The industry’s plea comes as the Senate prepared to pass a stimulus bill aimed at pulling the U.S. economy out of a pandemic-induced free fall, and the Trump administration is preparing the public for a second bill that would include support for flailing travel and other industries. President Donald Trump signed the first coronavirus-related measure, a supplemental appropriations bill on March 6.

“We’re going to back the airlines 100 percent,” Trump said at a news conference Monday. “It’s not their fault.”

He said domestic travel restrictions are “something that we talk about every day,” but the administration hopes it is not a step it will have to take. The president urged Americans to avoid “discretionary” travel.

The plight of U.S. airlines is “absolutely a key topic of discussion here,” National Economic Council Director Larry Kudlow told Fox Business on Monday morning. “It’ll be up to Congress as well.”

And in appearances Sunday on ABC’s “This Week With George Stephanopoulos” and “Fox News Sunday,” Treasury Secretary Steven Mnuchin said the administration is “very focused on airlines, hotels, cruise ships, workers for these industries.” He said on ABC that he had spoken with Speaker Nancy Pelosi “about airlines, which [are] critical to us, hotels, cruise ships, more SBA lending, more liquidity, some type of stimulus.”

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Losses

The request was preceded by gut-punch announcements from individual airlines in the wake of administration-imposed of travel restrictions that now include the United Kingdom and Ireland. United Airlines said it would cut its flights by 50 percent in April and May and projected its revenue in March would be $1.5 less than billion less than it was for March 2019.

American Airlines is cutting its international flights by 75 percent through May 6.

Airports are also struggling, according to Kevin M. Burke, CEO of the Airports Council International - North America. The association estimates financial losses are at $8.7 billion and rising because of the crisis.

Burke said that while airports have been forced “to get creative by cutting budgets and lowering their operating costs as quickly as possible, there are limits to that belt-tightening.”

A source familiar with the organization’s request says it has asked for $10 billion to offset the decline in travel.

Others offered dire prognoses for the airline industry as well.

The Centre for Aviation, a market intelligence organization for the aviation and the travel industry, warned that without coordinated government and industry action, “by the end of May 2020, most airlines in the world will be bankrupt.”

And three global airline alliances — oneworld, SkyTeam and Star Alliance — called on governments for assistance as they reeled from the pandemic. The three alliances represent almost 60 airlines around the world.

Mnuchin has also signaled his willingness to back aid for the cruise industry, which announced March 13 the temporary suspension of operations at U.S. ports for 30 days in the wake of the outbreak. But Democrats have been particularly wary about the cruise lines, arguing that many of those companies avoid paying U.S. taxes by registering their individual ships under flags of countries with lower taxes and, often, more lax laws and regulations.

‘Freeloading’

On Monday, labor weighed in as well, with Don Marcus, president of the International Organization of Masters, Mates & Pilots, rejecting the idea of a cruise line bailout.

“We should not give one dime in stimulus money to ‘flag-of-convenience’ party boats; they should be the last on the list for a federal bailout,” he said in a news release, noting also the companies’ use flags-of-convenience laws to avoid hiring American crews and adhering to American labor laws and standards.

“American taxpayers should not be sending their hard-earned dollars to an industry that freeloads off of our government and is notorious for exploiting low-cost foreign crews,” Marcus said.

Republicans on the House Transportation and Infrastructure Committee, meanwhile, said they were reviewing the airline association’s proposals.

“Airlines may be the most visible part of our aviation system, but we have to ensure that a stabilization package addresses the needs of airports, regional and charter airlines, cargo airlines, manufacturers and general aviation business,” said Justin Harclerode, spokesman for House Republicans on the committee. “This crisis is bigger than any one proposal, and all options are on the table as we work to ensure the continued stability of our national air transportation system.”

Republicans on the committee have eyed a number of proposals including airport improvement program grants that can be used for operational costs, such as janitorial expenses, debt servicing or staffing and loans for airlines to help purchase jet fuel and to meet other operational costs.

Were such loans to be used, airlines wouldn’t have to pay jet fuel tax — they could either pay back the loans or commit to purchase an equal amount of sustainable aviation fuel over the next 10 years. Airlines opting to do the latter would not have to pay back the loan, thus boosting the sustainable fuels market.

House Republicans are also discussing both tax relief for air carriers as well as supplementing existing formula programs — an easier route to get money to airlines without sweeping policy changes.

While the administration has singled out airlines, cruise lines and hotels specifically in comments to the press, other travel-related industries have made it clear they’re struggling.

Amtrak has repeatedly slashed service, and the American Bus Association, which represents the motorcoach industry, sent out a missive Sunday warning that “the situation is deteriorating by the hour.” It estimated a 40 percent drop in bookings since the outbreak began.

“Our message is pretty clear,” association CEO Peter Pantuso said in an interview. “As Congress is considering helping out other modes of transportation, we are an essential piece of the transportation network and we think we should be included in whatever is passed.”

He noted that spring school trips to Washington, D.C., have been virtually eliminated. “It’s completely shut down,” he said. “And there’s no telling when that will come back.” The industry employs about 100,000 and moves close to 600 million passengers a year, he said.

Pantuso said the association is hoping for zero interest loans over a 20- or 30-year period as well as direct grants.