(I’ll start this in GQ, but wouldn’t be surprised if it winds up elsewhere)
I was somewhat taken aback when airlines started laying off employees in massive numbers, within days of the Sept 11 attacks. Yes, business suffered immediately and dramatically…but jeez, guys, whatever happened to weathering the storm? Taking a loss and riding it out?
But OK, it’s their business. But then W. comes to the rescue, with a bailout package. OK, fine. But I presumed that the money would enable airlines to get through the downcycle without impacting massive number of employees. I haven’t heard of any strings attached–that the money was conditional on rehiring laid off workers, nor have I heard any airline saying that they would do so.
So is this a total freebie for the airlines?
And how is Southwest able to get through this unscathed–no layoffs?
This probably DOES belong in the Great Debates section.
Regardless, I agree with the OP’s basic premise. It’s NOT as if the airline industry was just hunky-dory on September 10th, but has fallen into crisis solely due to terrorism. On the contrary, numerous airlines were on shaky ground before the WTC attack, and now seem to be using that tragedy as an excuse to ask for a taxpayer bailout.
Since most of the airline industry’s problems have little or nothing to do with Osama Bin Laden, I don’t see why the airlines have a better claim to government subsidies than the hundreds of foundering dot-com businesses.
I believe in free enterprise; some believe in socialism. But what we’re witnessing here is the worst possible combination of the two: a system in which private industry gets all the profits when times are good, but the taxpayers cover the losses when times are bad.
I would also agree that Government bailouts of private entities is wrong. That is, in a perfect world. We, unfortunately don’t live in one and never will.
If the government thinks that an industry/entity/corporation is so big and important that letting it go down the tubes threatens to plunge the economy of the US or the world into chaos, it can and does step in to take steps to prevent this. It’s a judgement call. Sometimes they’re right, sometimes they’re wrong.
Are they wrong in this case? We may never know.
Were they wrong a few years ago when they stepped in to bail out the gigantic hedge funds? After all, this bailed out rich people, and I was furious at the time. If they had let the funds go under, would the world have been plunged into depression? We’ll never know now.
If the government hadn’t stepped in to bail out the airlines, which don’t have the wherewithall to withstand months of no business, would the world have been plunged into depression? Probably not, but America can’t depend on the kinds of travel that Europe can. Europe could do away with airlines, and survive. The US probably could not.
The US could continue to function without half of the dotcoms. It could not funtion without half of the airlines.
About Southwest:
I have not heard of them cutting flights. I flew them this weekend between San Diego and Sacramento round trip. Both of my flights were full. The cab driver that took me home from the airport said the business was very bad picking up people at the airport so there is evidence that traffic to the San Diego airport is bad.
I really have no clue why Southwest seems to be unaffected by the drastic slowdown in air travel. But they have generally been kicking butt in terms of actually making money over most of the other airlines for a long time now.
As for this being corporate welfare well of corse it is. But so what? I think there can be very little argument that if a large number of airlines go out of business that it will be bad for a lot more people than just investors, employees of the airlines and people not generally in the travel industry. I think that it is in the interest of the country to ensure that airlines keep flying. But I don’t think it is in our best interest that poorly run airlines flying which will certainly be an outcome of the bailout.
Just to clarify my OP–I’m not against corporate welfare per se (well, I am, but that’s not the point); but if a corporation is going to taken a govt handout, they shouldn’t be allowed to layoff workers at the same time.
The airlines maintain that they want compensation only for the government-mandated shutdown and for costs directly related to the hijacking incident. And that’s all that the government is offering.
So this is not a free ride for the airlines. I’m willing to bet that without government protection from libility claims stemming from the attacks, United and American will go bankrupt.
Our representatives aren’t stupid, and they’ve been dealing with the airline lobby for a long time. But they recognize that the airlines are in a tough spot, and to allow the industry to collapse would be worse for the taxpayer than to bail them out.
Despite the bailout, the latest news indicates that the airlines are still in trouble. The bailout is not nearly enough to offset the airlines’ continuing losses. People are starting to fly again, but load factors are still way down. The airlines can’t afford to pay their employees for doing nothing, so they must cut capacity and lay off employees. It’s that or close down.
About Southwest: they have been largely insulated from the drop in load factors for two reasons:
They don’t rely on high-profit business travellers, who also have stopped flying lately. They’re much better than most of the other airlines at eking out slim profit margins.
Before 11 Sep, they were on a massive growth program, adding capacity so fast that they didn’t have enough staff (pilots, attendants and mechanics) to fly the planes. After 11 Sep, all they had to do was park some planes and scale back their hiring plan. No layoffs necessary. And they’re still hiring today.
I have been thinking the same thing. When the airlines do get this aid package, are they going to resume their normal flight schedules and hire back all the employees? For some reason I don’t think so.
Also, why do the airlines get the bailout and other industries don’t? Is it because they have the highest profile in these attacks? It seems to me that if they made the layoffs to cover costs that their expeditures would be reduced, once again producing a stable business. I understand they may need assistance for the immediate losses but for the long term, help shouldn’t be needed.
There is a reduced demand for airtravel right now. The ariline industry will thus shrink. I thought that’s how free enterprise works.