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An Airline Bailout Should Have More Strings Attached Than a Harp

The industry was a hot mess before the coronavirus. Cash plus more deregulation will only make it worse.

Peter Parks/AFP/Getty Images

Airlines and airports got $50 billion worth of loans and grants in the stimulus approved by Congress last month, along with a tax break that also extends to private jets. They might get more soon; the White House suggested he could announce further bailout measures this weekend. Top Democrats are urging Treasury Secretary Steve Mnuchin, as he hands out bailout funds, not to impose any “unreasonable conditions” on the $2.7 trillion industry. The irony there is that airlines in the United States and around the world—now in a fight for their lives—are demanding a few unreasonable conditions of their own.

Reporting this week by Greenpeace’s investigative journalism publication Unearthed revealed that the International Air Transport Association (IATA) is instructing its members to lobby governments for a grab bag of tax exemptions and deregulatory measures as the pandemic unfolds, and which would stretch on well after it ends. One page of a letter sent out to IATA members urges them to seek a “collaborative approach” on “cost-cutting measures” with governments, for example mass firings. Unearthed also found that Emirates—the UAE’s state-owned airline—is pushing to avoid any new taxes through 2022. IATA has further called for amending and scaling back its only international framework for reducing industry emissions so as to “avoid an inappropriate economic burden on the sector.” If these companies get their wishes granted, it could be a disaster both for their employees, and, potentially, the planet.

America’s airline industry is already forty-plus years into a radical experiment with deregulation that’s gone off the rails. Airlines were formerly regulated as a public utility by the Civil Aeronautics Board, which regimented routes and ticket prices. They were then part of the first waves of deregulations that began during Jimmy Carter’s administration and exploded under Ronald Reagan, in tandem with Margaret Thatcher’s administration overseas. Deregulation was supposed to spur efficiency, with less expensive tickets for consumers. But within a few years companies were consolidating, and ticket prices had dropped by less than what they would have if the CAB had remained in control. This last decade, in particular, has seen increasing consolidation and a new suite of baggage fees, which brought in $5 billion for airlines in 2018. They’ve funneled the extra funds from nixing meals and seatback entertainment into boosting share prices. The biggest U.S. airlines poured 96 percent of their free cashflow into stock buybacks between 2010 and 2019.

These airlines are also notorious tax dodgers. In The American Prospect, Alexander Sammon has argued that this should all be grounds for nationalizing the airlines, or at the very least bringing them back under the kind of stringent federal oversight that defined an earlier era of air travel. This wouldn’t be unprecedented; the U.S. government nationalized airport security several months after 9/11 in forming the TSA. “The nationalization of the American airline industry could not only deliver travelers from the horrors of air travel,” Sammon writes, “but it could also forge a path out of our 2008-grade thinking when it comes to public intervention in the market.”

The lesson airline operators should take from this crisis is that, in a truly free market, the coronavirus might already have killed their companies. In the U.S., the industry now faces a 96 percent drop in traffic and has cut 71 percent of capacity, according to the industry group Airlines for America. Like shipping, airlines are not included in the Paris Agreement thanks, in part, to the difficulty of cross-border accounting. Instead, the International Civil Aviation Organization (ICAO)—a part of the United Nations—was tasked with arriving at a set of criteria by which the industry would reduce emissions worldwide, loosely in line with the Paris Agreement’s goals. They landed on what many considered to be the most lenient and circuitous possible path, the Carbon Offsetting and Reduction Scheme for International Aviation, or CORSIA. As its name suggests, the program is reliant almost entirely on controversial carbon offsetting programs, which have a tenuous relationship at best to actual emissions reductions.

Between 2013 and 2019, meanwhile, airline emissions grew by 26 percent. Air travel remains a relatively small chunk of emissions, although is one of the world’s fastest-growing sources of greenhouse gasses. It accounts for 12 percent of transportation in the United States, and air travel worldwide has been projected to double in the next 20 years. Its emissions are projected to triple by 2030, although its footprint could be growing even faster, threatening to account for as much as a quarter of the world’s carbon budget by 2050. Low-carbon alternatives in aviation are theoretically possible but could be decades away, requiring substantial investment for research and development to make biofuels or electric planes, for instance, functional and scalable. A provision from Nancy Pelosi—for airlines receiving aid to cut their emissions in half by 2050, and invest in alternative fuels—was stripped out of the final stimulus package last month.

The 50,000-member Association of Flight Attendants-CWA demanded that the bailout prioritize airline industry workers over shareholders, ensuring airline workers receive full pay and benefits for the duration of the crisis by awarding grants that can only be used to maintain payroll. Working with House Democrats, they got that provision built into the most recent stimulus, the CARES Act. Along with Representative Katie Porter, AFA-CWA International President Sara Nelson has now called for those protections to be extended to all workers by applying the same terms to assistance Mnuchin hands out through the $500 billion Economic Stabilization Fund the CARES Act gave him authority over. He could do this, they write, by “using his authority to convert loans into payroll grants—like the aviation sector—or to forgive any portion of loans used for payroll.” A likeminded measure proposed by Representative Pramila Jayapal would extend these Denmark-style protections to the rest of the economy, committing the government to cover 100 percent of payroll as long as the crisis lasts, up to $100,000 per person.

Whatever Trump announces this weekend, the U.S. now has more leverage over the airline industry than it has since deregulation. As some progressives have recognized, if there are no atheists in a foxhole, there’s also no laissez-faire in a pandemic. No one in the airline industry, at least, seems to think there is anymore. The question now is whether government interventions in aviation are made on behalf of workers and the planet, or against them.