An Airline Bailout Will Reportedly Happen, But With Strings Attached

U.S. airlines are asking the federal government for a bailout of more than $50 billion due to the financial devastation from the coronavirus fallout, and the government appears amenable to giving the industry what it needs.

With a catch.

Lawmakers are using the request to attach some conditions to the deal that could have long-term effects, starting with provisions that loans may convert to government equity stakes – essentially making the government a partner in the airlines – and that the airlines cannot increase executive pay or provide “golden parachutes” for two years.

“We are not bailing out the airlines or other industries – period,” U.S. Senate Appropriations Committee Chairman Richard Shelby told Reuters. “Instead, we are allowing the Treasury Secretary to make or guarantee collateralized loans to industries whose operations the coronavirus outbreak has jeopardized.”

The International Air Transport Association (IATA) has forecast the global industry will need up to $200 billion of state support.

“Money is very tight in most countries, so governments need to step back and be hard-nosed about any form of rescue … but it all must come with strict conditions or strings, attached,” Shukor Yusof, head of aviation consultancy Endau Analytics, told Reuters.

And those strings aren’t just related to how the loans will work financially and whether the government becomes an equity partner.

Senator Edward J. Markey (D-Mass.), a member of the Commerce, Science, and Transportation Committee, flat out said any infusion of money to the airlines come with “major strings attached,” Markey said in a press release.

That includes “new rules to prohibit consumer abuses like unfair change and cancellation fees; protections for front-line workers like flight attendants, pilots, and airport workers; special consideration for our smaller, regional carriers not represented by the major trade associations; and the development of long-term strategies and targets to reduce the carbon footprint of the airline industry. As our next coronavirus stimulus package is developed, I will demand these conditions be met before supporting any airline bailout.”

Two of the largest unions that represent airline and aviation employees agreed, according to Business Insider.

Sara Nelson, president of the Association of Flight Attendants, also said she wants a limit on stock buybacks, just one reason why the airlines need an infusion of cash since they collectively went through 96 percent of their reserves by pumping up their own stock.

“We are pushing for any relief to include restrictions on stock buybacks, dividends, executive bonuses, using funds in any way to undermine worker rights,” Nelson said, “in addition to other key provisions for long-term protections for workers, our families, our contracts, and our jobs.”

The Transportation Workers Union went a step further, urging lawmakers to consider limits on further increases in executive compensation as part of any federal assistance. It also proposed a ban on Chapter 11 bankruptcy filings by companies that receive federal funds for five years.

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