Skip to content

Should Congress dole out more money for airline employees? The case for and against

Aug. 07, 2020
9 min read
Should Congress dole out more money for airline employees? The case for and against
This post contains references to products from one or more of our advertisers. We may receive compensation when you click on links to those products. Terms apply to the offers listed on this page. For an explanation of our Advertising Policy, visit this page.

U.S. airlines benefitted massively from the first coronavirus aid package, known as the CARES Act. In fact, they benefited so much that labor unions would like to do it again. This may be the right thing for the economy, but it could also come with some unintended consequences for the industry.

Oct. 1, or "terrible Thursday" as Cowen analyst Helane Becker has called it, is a dreaded date on the calendars of many airline workers. Airlines can furlough or layoff staff with impunity beginning that day as the current CARES Act employment protections expire the day before. The protections bar airlines that accepted government loans and grants from laying off staff before that.

More than 75,000 federally-mandated notices warning of possible furloughs have already gone out to staff of major airlines. While not all of those employees will end up getting the boot, it is still significant sum considering potentially more than 30 million Americans are out of work and the unemployment rate stands at a historically-high 11.1%.

Sign up for the free daily TPG newsletter for more airline news!

To avoid these furloughs, labor unions are leading an effort to extend just the payroll-support provisions of the CARES Act through March 31, 2021. The Air Line Pilots Association (ALPA), Association of Flight Attendants-CWA (AFA) and 11 other unions are pushing for a "clean extension," or extending the program as it is by six months. This would add $25 billion for passenger airlines to the new aid package being debated in Congress.

This is not direct aid to airlines. The funds would go only toward non-executive employee compensation and could not be used for other expenses, like buying new jets or retrofitting aircraft cabins.

The push has some big backers. The heads of American Airlines, Delta Air Lines, Southwest Airlines and United Airlines have come out in support. In addition, 16 Republican Senators — including John Cornyn from Texas, which is home to both American and Southwest — have endorsed the measure in a letter to the Senate leadership.

But support alone does not mean additional aid is a good idea. Any extension of funds that is approved will likely come with strings. That could include, for example, an extension of flight-schedule requirements that have kept more flights in the air than many think are necessary — and would come as few expect the industry to return to pre-pandemic levels by March.

Related: United is latest to back union-led effort to extend coronavirus employment protections

Sign up for our daily newsletter
SAN FRANCISCO, CALIFORNIA - APRIL 12: A pilot walks by United Airlines planes as they sit parked at gates at San Francisco International Airport on April 12, 2020 in San Francisco, California. San Francisco International Airport has a seen a huge decline in daily flights since the coronavirus shelter in place. United Airlines, the airport's largest carrier with the most daily flights with 290 flights per day before the start of the COVID-19 pandemic, has reduced their daily flights to 50 per day. (Photo by Justin Sullivan/Getty Images)
A pilot walks by United Airlines planes at San Francisco International Airport in April 2020. (Photo by Justin Sullivan/Getty Images)

The case for why protections should be extended

"Absent a clean reauthorization of the program, hundreds of thousands of aviation employees will lose their jobs," ALPA president Joseph DePete wrote in a July 21 letter to the Senate. "The economic damage to the economy and the industry will be substantial... A painful stretch of unemployment will place long-term constraints on industry capacity."

The argument does make some sense, even if not everyone agrees it's the right thing to do. Once pilots are furloughed, certain training and certification requirements lapse, requiring lengthy retraining when they return — whether that is after one month or two years.

That could hamper airlines from resuming flights quickly if travelers began returning in significant numbers sooner than many expected. And while this does not look likely where we stand now, it could be ruled out in the future if the so-far choppy recovery picks up steam.

Related: US airlines send another 10,500 furlough notices as industry faces dramatic contraction

"If you don't do this, you're going to be in a situation that you're going to hurt the economic recovery," Frontier Airlines CEO Barry Biffle said in support of extending the protections during an Aug. 6 interview with TPG. "If we’re not there to deliver the volume of passengers, then it’s going to be 2023 before the service industries are back."

As Biffle pointed out, the benefits extend beyond airlines. The funds would act as a pass-through to the tens-of-thousands of aviation workers that would otherwise end up on state unemployment rolls and other forms of government assistance. This would help the general U.S. economy, which contracted by 9.5% year-over-year during the second quarter.

Not to mention, what politician wants massive layoffs little more than a month before the Nov. 3 election?

Related: Frontier Airlines CEO says ‘it’s time to fly,’ fate of recovery rests with travelers

An airline employee walks past empty American Airlines check-in terminals at Ronald Reagan Washington National Airport in Arlington, Virginia, on May 12, 2020. - The airline industry has been hit hard by the COVID-19 pandemic, with the number of people flying having decreased by more than 90 percent since the beginning of March. (Photo by ANDREW CABALLERO-REYNOLDS / AFP) (Photo by ANDREW CABALLERO-REYNOLDS/AFP via Getty Images)
An airline employee walks past empty American Airlines check-in counters at Washington Reagan National Airport in May 2020. (Photo by ANDREW CABALLERO-REYNOLDS/AFP via Getty Images)

The case against: Airlines shouldn't delay needed restructuring

The airline industry knows that it is in for a multi-year recovery. United Airlines CEO Scott Kirby expects the number of U.S. air travelers to plateau at about half of 2019 levels until there is a COVID-19 vaccine, something he does not anticipate will be widely available until the end of next year. Delta Air Lines CEO Ed Bastian says it will be at least three years before the industry recovers.

In other words: airlines must shrink to match the number of people that are flying. That means fewer planes, fewer routes and smaller workforces.

"The airlines are walking zombies now," wrote The Cranky Flier author Brett Snyder. "They’re flying more flights than they need with far more employees as well."

Related: United Airlines worries travel recovery will stall until there’s a COVID vaccine

Evercore analyst Duane Pfennigwerth puts it more mildly. Additional government aid will delay airline restructuring, including ending excess and unprofitable flights. Going forward, it will make it more difficult for carriers to forecast their cost structure and what other cuts are needed.

"Rather than tackle difficult but perhaps more sustainable solutions such as complex work rules," he wrote on Aug. 6. "The industry would have received an entire year of payroll support."

And airlines have not been clamoring for aid. Until the middle of July, executives at major carriers repeatedly said they did not need additional assistance. Then, as the likely furlough numbers racked up, one airline after another fell quietly in line behind the unions.

Related: Delta says air travel recovery has stalled, hopes more flyers return by end of summer

Even then, airlines including Allegiant Air, Delta, JetBlue Airways and Southwest have found ways to avoid some or all furloughs without government assistance. For example, Delta came up with several voluntary programs — like working one month and taking the next off on a rotating basis — to avoid furloughs after it realized that will have 3,000 excess flight attendants this winter.

On a final note, an extension of CARES Act employment protections appear to lack broad support. The first effort was led by trade group heavyweight Airlines for America (A4A) with nearly unanimous support, while the latest push is led by unions with the airlines mostly in the background.

There are benefits to keeping airline staff employed through March, least of which are the broader economic benefits. But at the same time one has to ask whether paying airline employees — some of which can earn over $200,000 a year -- is the best use of limited government funds.

“We need to see a pickup in revenue,” Delta CEO Ed Bastian wrote in a memo to staff on Aug. 6 that was viewed by TPG. That, he said, was the only way for the carrier to recover from the crisis. Prominently absent was any mention of additional aid.

Related: Global air travel unlikely to recover until 2024 as COVID remains ‘issue’ in US, elsewhere

Featured image by Getty Images

Top offers from our partners

How we chose these cards

Our points-obsessed staff uses a plethora of credit cards on a daily basis. If anyone on our team wouldn’t recommend it to a friend or a family member, we wouldn’t recommend it on The Points Guy either. Our opinions are our own, and have not been reviewed, approved, or endorsed by our advertising partners.
See all best card offers

TPG featured card

Best premium travel card for value
TPG Editor‘s Rating
Card Rating is based on the opinion of TPG‘s editors and is not influenced by the card issuer.
4 / 5
Go to review

Rewards

1 - 10X points
10xEarn 10x total points on hotels and car rentals when you purchase travel through Chase Ultimate Rewards®.
5xEarn 5x total points on flights through Chase Ultimate Rewards®.
3xEarn 3x points on other travel and dining.
1xEarn 1 point per $1 spent on all other purchases

Intro offer

80,000 bonus points
Earn 80,000 bonus points after you spend $4,000 on purchases in the first 3 months from account opening. That's $1,200 toward travel when you redeem through Chase Ultimate Rewards®

Annual Fee

$550

Recommended Credit

740-850
Excellent
Credit ranges are a variation of FICO© Score 8, one of many types of credit scores lenders may use when considering your credit card application.

Why We Chose It

If you are looking to take your premium rewards to the highest level, this card is really a no brainer in our eyes. Chase's Ultimate Rewards make points easy to redeem, with a wide range of 10 airline and three hotel transfer partners and a friendly user interface. Despite the high annual fee, Chase is consistently adding new benefits to keep the card competitive in a fierce premium rewards field.

Pros

  • $300 annual travel credit as reimbursement for travel purchases charged to your card each account anniversary year
  • Access to Chase Ultimate Rewards hotel and airline travel partners
  • Unlimited 3x points on the broad category of travel and dining
  • 50% more value when you redeem your points for travel through Chase Ultimate Rewards®
  • Broad definitions for travel and dining bonus categories

Cons

  • Steep $550 annual fee
  • May not make sense for people that don't travel frequently
  • You must spend the $300 travel credit before earning 3x points for travel and dining
  • No automatic hotel elite status
  • Earn 80,000 bonus points after you spend $4,000 on purchases in the first 3 months from account opening. That's $1,200 toward travel when you redeem through Chase Ultimate Rewards®
  • $300 Annual Travel Credit as reimbursement for travel purchases charged to your card each account anniversary year.
  • Earn 5x total points on flights and 10x total points on hotels and car rentals when you purchase travel through Chase Ultimate Rewards® immediately after the first $300 is spent on travel purchases annually. Earn 3x points on other travel and dining & 1 point per $1 spent on all other purchases
  • Get 50% more value when you redeem your points for travel through Chase Ultimate Rewards®. For example, 80,000 points are worth $1,200 toward travel
  • 1:1 point transfer to leading airline and hotel loyalty programs
  • Access to 1,300+ airport lounges worldwide after an easy, one-time enrollment in Priority Pass™ Select and up to $100 application fee credit every four years for Global Entry, NEXUS, or TSA PreCheck®
  • Count on Trip Cancellation/Interruption Insurance, Auto Rental Collision Damage Waiver, Lost Luggage Insurance and more
Best premium travel card for value
TPG Editor‘s Rating
Card Rating is based on the opinion of TPG‘s editors and is not influenced by the card issuer.
4 / 5
Go to review

Rewards Rate

10xEarn 10x total points on hotels and car rentals when you purchase travel through Chase Ultimate Rewards®.
5xEarn 5x total points on flights through Chase Ultimate Rewards®.
3xEarn 3x points on other travel and dining.
1xEarn 1 point per $1 spent on all other purchases
  • Intro Offer
    Earn 80,000 bonus points after you spend $4,000 on purchases in the first 3 months from account opening. That's $1,200 toward travel when you redeem through Chase Ultimate Rewards®

    80,000 bonus points
  • Annual Fee

    $550
  • Recommended Credit
    Credit ranges are a variation of FICO© Score 8, one of many types of credit scores lenders may use when considering your credit card application.

    740-850
    Excellent

Why We Chose It

If you are looking to take your premium rewards to the highest level, this card is really a no brainer in our eyes. Chase's Ultimate Rewards make points easy to redeem, with a wide range of 10 airline and three hotel transfer partners and a friendly user interface. Despite the high annual fee, Chase is consistently adding new benefits to keep the card competitive in a fierce premium rewards field.

Pros

  • $300 annual travel credit as reimbursement for travel purchases charged to your card each account anniversary year
  • Access to Chase Ultimate Rewards hotel and airline travel partners
  • Unlimited 3x points on the broad category of travel and dining
  • 50% more value when you redeem your points for travel through Chase Ultimate Rewards®
  • Broad definitions for travel and dining bonus categories

Cons

  • Steep $550 annual fee
  • May not make sense for people that don't travel frequently
  • You must spend the $300 travel credit before earning 3x points for travel and dining
  • No automatic hotel elite status
  • Earn 80,000 bonus points after you spend $4,000 on purchases in the first 3 months from account opening. That's $1,200 toward travel when you redeem through Chase Ultimate Rewards®
  • $300 Annual Travel Credit as reimbursement for travel purchases charged to your card each account anniversary year.
  • Earn 5x total points on flights and 10x total points on hotels and car rentals when you purchase travel through Chase Ultimate Rewards® immediately after the first $300 is spent on travel purchases annually. Earn 3x points on other travel and dining & 1 point per $1 spent on all other purchases
  • Get 50% more value when you redeem your points for travel through Chase Ultimate Rewards®. For example, 80,000 points are worth $1,200 toward travel
  • 1:1 point transfer to leading airline and hotel loyalty programs
  • Access to 1,300+ airport lounges worldwide after an easy, one-time enrollment in Priority Pass™ Select and up to $100 application fee credit every four years for Global Entry, NEXUS, or TSA PreCheck®
  • Count on Trip Cancellation/Interruption Insurance, Auto Rental Collision Damage Waiver, Lost Luggage Insurance and more