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Trump urges Congress to provide $25 billion bailout for U.S. airlines

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Trump urges Congress to provide $25 billion bailout for U.S. airlines

Old 7th Oct 2020, 13:16
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Trump urges Congress to provide $25 billion bailout for U.S. airlines

Reuters are running a story that.... U.S. President Donald Trump said late on Tuesday Congress should quickly extend $25 billion in new payroll assistance to U.S. passenger airlines furloughing thousands of workers as air travel remains down sharply amid the coronavirus pandemic.

Trump’s new demand came hours after he announced his administration would abandon talks with congressional Democrats over proposals to spend at least $1.6 trillion in additional coronavirus relief funds, a move that appeared to scuttle a new $25 billion bailout for U.S. passenger airlines to keep tens of thousands of workers on the job for another six months.

But Trump later issued a call on Twitter, urging Congress to “IMMEDIATELY Approve 25 Billion Dollars for Airline Payroll Support.... I will sign now!” he wrote, saying Congress could tap unused funds from prior coronavirus relief to fund airlines and a separate program for small business.

American Airlines AAL.O and United Airlines UAL.O last week began laying off 32,000 workers, but had said they would reverse course if lawmakers reach a deal on a new government program to fund payroll costs.

A prior $25 billion airline payroll support program of mostly cash grants approved by Congress in March expired on Sept. 30.

House Speaker Nancy Pelosi last Friday expressed support for a standalone bill to keep airline workers on the job if a broader package could not be reached.

A Pelosi spokesman did not respond to a request for comment late Tuesday.

Congress is expected to return to session on Oct. 19 and lawmakers may make a new attempt to pass a standalone measure to provide the $25 billion sought by airlines but the prospects are uncertain, even though the airline relief enjoys strong support in both the House and Senate.

One remaining issue is how Congress would pay for the new funding, a senior congressional aide told Reuters Tuesday.American Airlines closed about 4.5% lower after Trump's tweet on ending talks, while shares of United Airlines UAL.O closed 3.6% lower. Southwest Airlines LUV.N stock fell 2.4% and Delta Air Lines DAL.N shares closed 2.9% lower.

Airlines for America, the trade group representing major U.S. airlines, noted “thousands of airline workers across the country have already lost their jobs – and more furloughs are expected in the coming weeks.” But the group added “there is a glimmer of hope that our leaders in Washington will act and save these jobs before it’s too late.”

The U.S. Travel Association said “with millions of Americans suffering, it is woefully shortsighted to end relief negotiations” and added that “without immediate aid, 50% of all travel-supported jobs will be lost by December — an additional loss of 1.3 million jobs.”

U.S. airlines are collectively burning about $5 billion of cash a month as passenger traffic has stalled at around 30% of 2019 levels. After tapping capital markets, they say they have enough liquidity to last them at least 12 months at that rate.

Between voluntary and involuntary furloughs, major U.S. airlines’ workforce will shrink by at least 25% in October.

Industry experts expect a slight improvement in domestic demand over the winter holidays from current levels, but it will remain far below last year’s volumes. Meanwhile, higher-margin business and international travel remain severely depressed.

Chief executives acknowledge that pre-pandemic air travel demand is unlikely to return for years, and still unknown is how the pandemic, which has forced drastic changes in habits, will impact travel behavior.

American Airlines will end service to 11 smaller airports on Wednesday after Congress failed to approve additional aid.

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Old 7th Oct 2020, 15:02
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Mostly political blackmail prior to the election. damn if you do, damn if you don't.

Clearly if nothing else happens the coming weeks the airlines are out on a limb and have no idea what is going to happen in our lame duck session. If Biden wins but yet can't do a thing to help the economy between now and Jan (maybe longer if nobody wins the election).

Looks like the airlines are going to have to pick a winner to survive until Jan. Course that is all US carriers and not the Europeans. I really don't see how the US airlines are going to survive between now and Jan with a lame duck session.coming
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Old 7th Oct 2020, 15:09
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American Airlines will end service to 11 smaller airports on Wednesday after Congress failed to approve additional aid
Strange times. where the USA the republican's advocates of the free market now in power , are slowly following state run communist economic principles . Reminds me of the East Germany DDR times .where maintaining people working was the goal even if the cost was more of what they produced.
Just being sarcastic. I wish my fellow Americans well in these strange and difficult times....
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Old 7th Oct 2020, 15:56
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A large check followed by another large check, that’ll take the airlines (where I’m employed) to early into 2021 at which time they’ll be back with their hand out looking for a third round of stimulus payouts. It has to stop, the market must be allowed to shape the outcome, not the government propping up those airlines that didn’t use the last decade of profitability wisely.
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Old 7th Oct 2020, 17:49
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West Coast - the problem is I'm not sure any of the airlines (cargo excepted) could survive this without help - a lot of help.
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Old 7th Oct 2020, 18:02
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I'm not so sure that wise minds could foresee the knee jerk reaction of a government who blindly bans travel without regard to the irreparable harm it is doing to an economy.
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Old 7th Oct 2020, 18:10
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tdracer

It’s not financially sustainable (or ethically responsible to taxpayers) to maintain pre-Covid capacity when there clearly isn’t the need. The capacity of the airlines should contract/expand to reflect the market’s needs. Shrinking to profitability is painful but it’s legitimate and offers a sustainable business plan.

The last PPP covered roughly half a year, the next, likely the same. That still leaves a big gap to reach pre-Covid passenger count timelines projected by the airlines. In six more months we’ll be right back here arguing the merits of another handout.

Last edited by West Coast; 7th Oct 2020 at 18:49.
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Old 7th Oct 2020, 19:39
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A “tiny proportion” is around 30% of where the US part 121 industry was pre-Covid. That means they have excess capacity of somewhere around 70%. The return to pre Covid levels is up to four years down the road by some airlines estimates. To maintain that capacity minus the need is unethical and unfair to the stronger airlines.

It’s time to cull the herd, my airline may very well be one of the ones to go.
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Old 7th Oct 2020, 19:44
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Contour flyer,

Supply and demand has been a way of life for the airlines for some time, more efficient aircraft and SLF preferring direct routings ended the hub and spoke model. This is just another iteration, albeit in a fore-shortened timeframe.
Ignoring Covid19 briefly, aviation was contracting before Covid19, how many airlines have gone under in the last 5 years?

$25B is a huge sum, especially as it is effectively a stop gap measure; Given the extent of the pandemic and the likelihood that the market is unlikely to start recovering in the near future, is this the best use for this sum?
Aviation, along with other industries is not going to bounce back to pre-Covid19 volumes in the short term, therefore, it makes no sense to maintain readiness for a market that is unlikely to be there for some time.

Food airfreight isn't going to contract substantially, people are used to having seasonal produce available all year round; Airfreight is actually doing well, lower oil prices and increased demand (PPE,etc).

Aviation isn't the only industry whose employees have been severely impacted by the Covid19, better to use the money wisely in welfare for all those impacted and job (re)-creation when appropriate.

Last edited by Momoe; 7th Oct 2020 at 19:54. Reason: amendment
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Old 7th Oct 2020, 21:35
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The risk is if too much of the industry fails, it could lose critical mass and completely collapse. Not just the airlines, but the entire support structure. The airline industry is critical infrastructure - even a partial collapse could have catastrophic cascading consequences to other parts of the economy.
No, the airline industry is not alone, but it'll be a whole lot harder to recreate a viable airline industry than to - for example - open new restaurants to replace all those that went under due to the lockdown.
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Old 7th Oct 2020, 22:29
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Too much money for what if scenarios. The major airlines have options available to best ensure survival, they don’t want to, I get it.
It’s easier to get a bail out from the government than make the tough decisions that need to be made.
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Old 8th Oct 2020, 00:15
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That's a neat end-of-discussion answer.

To keep this on subject, please suggest some of these tough decisions (not related to executive salary bonus)

Also suggest some options to best ensure survival so we can see how much trickle down effect they might have on our livelihoods
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Old 8th Oct 2020, 01:22
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I think many still don’t get the magnitude of the crisis commercial flying is facing. At the point we are at right now, nothing I say again nothing any airline could come come up with in terms of money saving measures would make it survive.
The only difference will be made by governments aid and heavy credit lines.

The reason is simply that the airlines are not built or meant to sustain something like this, never mind the 300+ aircraft airlines who have always only made money by expanding. The margins are simply too thin, you don’t need to be a phd in economy to see that another 6 months of this are not sustainable for most.
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Old 8th Oct 2020, 02:51
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lomapaseo

What are the options?
- The passenger count comes roaring back to historical norms and the situation self corrects.
- The government bails out the airlines again with an expectation it becomes the norm over the following years as the bloated capabilities remain
intact.
- The airlines shrink. You’re a pretty smart fella, you know what the answers are. I suspect you’re just wanting me to go on record, that’s fair.

Furloughs, force majeure, abrogating Vendor/OEM/leasing company contracts... I’m sure those are the most contentious topics on anyone’s list of potential moves.
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Old 8th Oct 2020, 03:51
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The inconvenient facts

1] Airlines are a cyclic industry. This will be the 4 th time the industry has cratered in my career.

2) The airlines have enjoyed unprecedented levels of profitability in the 2013 to 2019 time period

3) Prudent airline executives would have used some of the profit to build up a rainy day fund for the next downturn, instead they pissed it away to juice the stock price and therefore the exec bonuses, including borrowing money to buy back stock

4) The end result is the same old, same old...Capitalized profits, Socialized losses. Tax payers pay for the short term thinking and utter lack of vision of the entire airline senior management, all of whom will retire with 7 or 8 figure pay outs.
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Old 8th Oct 2020, 10:12
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A good summary there.
Whilst air transport is critical, so are many other industries.
points 3 and 4 there hit the nail on the head.
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Old 8th Oct 2020, 10:39
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To be fair, they know the industry is so cyclical - therefore they obviously feel compelled to cash in when the opportunity presents itself.
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Old 8th Oct 2020, 15:07
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Best way to restore the economy and all affected industries is to take responsible steps to reduce the transmission rate, bring viable vaccines to bear and provide stimulus payments to consumers. Keep small businesses alive. Corporate well-fare is just a way to minimize the drop in share prices and minimize losses to the wealthy.
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Old 8th Oct 2020, 15:28
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Big Pistons , your points 3 and 4 are hitting where it hurts .
As to aviation being a critical infrastructure , absolutely, but commercial airlines ? The core transport activity between some city pairs perhaps, but , for example are 80% of RYR routes critical for Ireland/? Are 20 flights a day between say London an Paris part of a critical infrastructure of any of the 2 countries involved ?
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Old 8th Oct 2020, 18:11
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Why does this thread remind me of railroads?

Same problems?

Ah but what will take over when air travel goes bust for the plodders. Damned oceans get in the way of cars busses and trains.

The airline business model isn't the total culprit nor is it their customers, it is being brought to it's knees by governments and not the freedom to choose an adjustment
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