Airlines Say Government Bailout Helped Avoid Financial Disaster
WASHINGTON — A Senate panel came away surprisingly pleased Wednesday with its check on whether airlines were using government bailouts appropriately during the COVID-19 pandemic.
Airline executives told the Senate Commerce, Science and Transportation Committee that subsidies under the Payroll Support Program saved their industry from financial disaster.
“I can sum up the PSP in two words, it worked,” said Gary Kelly, chief executive officer of Southwest Airlines.
The airline used the money to continue the pay and benefits of its stewardesses, mechanics and other rank-and-file workers. Southwest employs about 54,000 workers, many of whom were in danger of losing their jobs as the pandemic frightened away passengers and bit into the U.S. economy.
“Congress recognized the severity of the COVID-19 threat,” Kelly said about the bailouts.
The Payroll Support Program refers to subsidies that began last year for employee wages and benefits of passenger and cargo air carriers as well as their most vital contractors.
The federal government gave airlines $54 billion under the program despite protests from some consumer groups about corporate welfare. The airlines are required to repay only $14 billion.
It was a desperation move by Congress as the pandemic cut the number of airline passengers by about 95% and airline revenue by the same amount.
The airlines responded initially in early 2020 with massive layoffs, reduced flight schedules and taking aircraft out of service.
By Thanksgiving last month, the number of airline passengers had returned to near normal levels. Airline officials said Wednesday their rebound could be credited in part to the Payroll Support Program as well as new vaccines.
Airline travel rose 107% in 2021 and is on track for a full recovery next year, according to airline industry figures.
“You showed leadership at a time it was needed most,” said Doug Parker, the American Airlines chief executive officer. “The Payroll Support Program has been an overwhelming success.”
Airlines were concerned that as they laid off or furloughed workers — many of whom required years of training — they would never come back. The shortage of skilled workers could have created safety risks and forced airlines to ground flights, Parker and other airline officials said.
“Thanks to PSP, we have the team in place that we need to run our airline successfully,” he said.
Sen. Maria Cantwell, D-Wash., the committee’s chairwoman, talked about how close the aviation industry came to a collapse that threatened to spread its financial problems deep into the U.S. economy.
“It went through the entire ecosystem of aviation,” Cantwell said.
Instead, the Payroll Support Program became a model for other countries trying to save their airline industries, she said.
“I know we’re in a better place than we would have been if we didn’t do the PSP program,” Cantwell said.
Several senators asked about unrelated challenges of airlines, such as air rage and customers demanding refunds.
In the first half of this year, the Federal Aviation Administration received about 3,100 reports of unruly passengers. The yearly average over the previous decade was less than half as high.
Many of the incidents resulted from disputes over airline mask mandates, sometimes leading to attacks against flight attendants or passengers.
“We absolutely look forward to the day we no longer have the mask requirement,” said Sara Nelson, president of the Association of Flight Attendants.
In the interim, “We do need more enforcement in the airports,” she said.
She suggested restricting alcohol sales at airports.
“It is at the expense of our safety,” Nelson said.
In the United States, unruly passengers face fines as high as $25,000 and sometimes prison sentences. Airlines can choose to ban problem passengers from future flights.
Tom can be reached at [email protected]