Skip to content

The Critical Points: What we should want in return for bailing out the travel industry

March 27, 2020
8 min read
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.

Each week in his column “The Critical Points,” TPG Loyalty and Engagement Editor Richard Kerr presents his opinion on a loyalty program, card product or recent news that he believes is overlooked, unsung or the result of groupthink taking mass opinion in a direction with which he doesn’t agree. His goal is not necessarily to convince you to agree with his position but rather to induce critical thought for each of the topics and positions he covers.

As I write this, a $2 trillion (that's trillion with a "t") relief bill is expected to be passed by Congress and signed by the President over the next 48 hours. The bill currently contains $50 billion to be given to airlines to cover payrolls in the form of grants and loans, and the hotel industry has also been on Capitol Hill requesting help in different forms. All of this will come from us, the American taxpayers.

I agree that hotels and airlines (though not cruises) are essential components of our national infrastructure that must exist in order for the rest of the economy to work. However, I have hesitations about bailing out these three specific industries in the first place:

  • Millions of businesses are facing a struggle that surpasses that of these large industries with tremendous resources and a front line ticket to Congressional offices. Why should these companies receive a direct bailout and not other businesses?
  • Many airlines went bankrupt after 9/11 but continued to fly. If a hotel chain, cruise line or airline go bankrupt, that doesn't necessarily mean they cease to exist.
  • At least in the case of airlines and hotels, they'll almost certainly come back and ask for more money.
  • Decisions over the last decade of wealth and abundance resulted in some companies unable to last a week without having to begin furloughs, layoffs and drawbacks. How is it that we — as individuals — are supposed to have six months worth of expenses in an emergency fund, but some corporations have less than a week's worth?

Regardless of my hesitations, government financial assistance is already in motion and will at least occur for the airlines. It's highly likely that some form of assistance will materialize for hotels, and this may extend to the cruise industry as well. Cruise lines have used the Cruise Lines International Association (CLIA) — the main trade group of the industry — to state that they are not seeking a bailout, but some executives have talked about potential assistance.

If we — as both customers and as taxpayers — are footing the bill for these assistance programs, we should have requirements in exchange for money. Here is what I would request from each industry in exchange for a bailout


(Photo by Clint Henderson/The Points Guy)
Government support for airlines should only come with strings to better protect consumers. (Photo by Clint Henderson/The Points Guy)

It appears my first requirement of the government taking a stake in the airlines will come to fruition. As reported by the Wall Street Journal, Treasury Secretary Steve Mnuchin indicated that last-minute negotiations resulted in the government having some form of equity in exchange for the $50 billion. This leads to questions about what kind of ownership and influence the government will have in airline operations — which will likely become sticky at some point in the future.

Regardless, if taxpayers have now repeatedly bailed out the airlines, we should have ownership.

Second, the U.S. Department of Transportation (DOT) needs to be given the teeth to begin enforcing and regulating frequent flyer programs and mistake fares. Airlines should be held accountable for fares they publish and be required to honor tickets bought. If an airline makes a mistake and publishes an incorrect but bookable fare, the problem lies with the airline's revenue management and not with a consumer. The line between what is a fare sale and what is a mistake is nearly impossible to define, and therefore the consumer can't be given the onus of deciding.

Finally, the one-sided relationship between loyalty programs and the traveling public needs to be address. The 'sole discretion' language in all frequent flyer programs as well as the Supreme Court's ruling in Northwest v. Ginsberg essentially gives us (as consumers) no recourse in the case of adverse action by a program. Airlines utilize their miles as a currency, using various marketing tactics to give considerable worth to the programs. However, they hold all the bargaining power. Airlines can add new restrictions, revoke rules and break promises at will, all the while utilizing a currency they sell and profit from — yet face no regulation on it.

Sign up for our daily newsletter

If American Airlines has wrongfully closed your account and garnered thousands of dollars worth of assets from it, you have no recourse — yet your tax dollars are now going to fund the airline.


(Photo by Clint Henderson/The Points Guy)
Any government support for hotels should require more transparent pricing. (Photo by Clint Henderson/The Points Guy)

In exchange for assisting hotel chains, taxpayers deserve fair and transparent pricing. The marketing tactic of excluding resort fees, urban destination fees and any other add-ons from advertised rates should be completely and totally banned. This applies to standard hotels and resorts but also casinos — where the resort fees continue to increase — and home-share platforms like Airbnb — where the cleaning fees and other add-ons aren't clearly disclosed in the search results.

If you offer lodging to the public in any form on a nightly, weekly or monthly basis, you must display the entire price in advertised rates as soon as a consumer searches.

In addition, we should demand the same ability to regulate hotel loyalty programs described above for airlines. Uncontrolled devaluations and rule changes of a currency used to attract customers to your business can't be allowed to continue.

Cruise lines

As stated above, the cruise industry is not currently requesting a bailout but appears to be securing loans from different banks until sailings restart and revenue rebounds. Some executives have discussed the possibility of government backing for these loans, so the conversation may not be over.

There's a potential problem here: The majority of cruise lines that sail from the U.S. are not American companies in any real legal way. I spoke with TPG Senior Cruise and Travel reporter Gene Sloan who provided me the following information:

"The U.S. entity Carnival Corporation is based in Florida but is registered in Panama. Royal Caribbean Cruises Ltd. is based in Miami but incorporated in Liberia. Norwegian Cruise Line Holdings is 'domiciled' in the U.S. but its 8-K filing this month lists Bermuda as its state or other jurisdiction of incorporation."

An avid cruiser myself, I've always been aware that ships are flagged (registered) in foreign ports to for taxation and jurisdictional purposes. This also allows cruise lines to hire onboard staff without fully complying with U.S. employment laws.

In response to all of this, my request for the cruise line industry is a simple one: If you do decide to come to the U.S. government for any type of assistance, you must become a company legally based in the country and thus subject to all applicable taxation.

Bottom line

My own livelihood, passions and interests lie in these three sectors, so I have a personal interest in seeing them weather the coronavirus storm. However, the larger picture is hard to ignore. Thousands of employees would face an unknown future if there is no government assistance and one (or more) of the major companies fails. This would then have massive impacts on supporting industries, affecting millions more. All of this has ripple effects all the way up and down the economy.

While I'm generally opposed to bailouts, they're almost certainly going to happen. In exchange for our money, taxpayers should have the above requirements met. Unfortunately, the voice of the public may not carry as much weight as those lobbying on behalf of the industries. One can certainly hope that the traveler be looked out for in exchange for our money, but I have my doubts.

Featured image by Getty Images/EyeEm

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