Were the Airline Bailouts Really Needed?

Andrew Ross Sorkin, writing for The New York Times:

It is fair to say that we socialized the airline industry’s losses and largely privatized the gains.

No other industry affected by the pandemic received more from the government. There was no special program for hotels or restaurants or travel agencies. Companies in those industries had to line up for the small business-focused Paycheck Protection Program and pray. The largest loan the program could make was $10 million.

The question isn’t whether airline employees should have been helped, it’s whether airline shareholders should have been. The airline bailouts weren’t simply a job-protection program, as advertised. In case you’re not convinced, there’s this: United invested $20 million into an electric helicopter company last month that went public through a special purpose acquisition company, or SPAC. Does that sound like a company that is in such dire straits that it requires a taxpayer-funded bailout? It received a third rescue payment after it made the investment.

With the stock market now soaring, it is worth considering whether the airlines needed taxpayer money at all.

Pairs well — albeit frustratingly — with my previous item. Sorkin points out that a big part of the “privatized profits” is that when business is good, the airlines pump their profits into stock buybacks, rather than saving for a rainy day (or pandemic year). Restaurants don’t have that option — they run on tight margins and generally slim profits even when business is good.

And yes, there are big airline-size corporations that run massive restaurant chains. A bailout that focused on privately-held restaurants would have been one way to start.

Wednesday, 17 March 2021