Confusion among U.S. airlines as airplanes fly virtually empty to get bailout funds

U.S. airline industry bailout creates unintended consequences. TAC updates its recovery model.

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Release Date
March 31, 2020
Confusion among U.S. airlines as airplanes fly virtually empty to get bailout funds
This article and analysis was reported and written by Jon Ostrower and Courtney Miller.

U.S. airlines are considering backtracking on some of their planned capacity reductions, confused about the terms and conditions for accepting the $50 billion block of taxpayer funds intended to keep the country’s air transport industry afloat, senior airline leaders told The Air Current.

The implementation of the $2 trillion stimulus package passed last week and signed into law by President Trump creates a different strategic environment for airlines who now find the U.S. Government acting as a governor for its own acts of self-preservation.

Related: Coronavirus plunges aviation into singular event, traditional recovery models useless

Airlines reducing capacity lags against the backdrop of a nearly-nonexistent air travel market as COVID-19 takes its toll both domestically and globally. TAC is aware of at least two U.S. carriers that were running their operations with single-digit load factors in recent days.

Further, The Air Current has updated its industry recovery model to reflect a divergence in airline capacity and the actual number of passengers taking flights.

The airlines are operating virtually empty. On Sunday, the Transportation Security Administration reported that it screened 93% fewer people than it had on the same day one year prior — some 180,000 people. That figure includes screenings for airline crews, TAC was told by a person briefed on the figure. It is not clear if the figure also includes those that work at the airport and weren’t flying.

While the ultimate goal of the bill was to protect employment, wages and benefits among airline staff and contractors through September to bridge the on-going crisis, the structure creates incentives for airlines to continue flying their airplanes nearly empty, only further accelerating the cash burn each needs to survive. The package includes requirements to preserve air service it had as of March 1, 2020, so as to prevent a community from losing access to the air transport network.

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