March 16, 2020, © Leeham News: Airlines in Europe already asked governments for financial aid as coronavirus forces massive schedule cutbacks and in some cases, complete service suspension.
In the US, talk of aid began in earnest last week.
Delta Air Lines, which is parking 300 airplanes and cutting 40% of its capacity, said it plans to seek US financial assistance.
There is increasing talk that the US may order a complete suspension of domestic air service. If so, this would be like 9/11, when for the first time in history the US shut down its skies.
That lasted only three days.
With federal officials saying the crisis hasn’t peaked in the US and it may be a couple of months before the crisis subsides.
US carriers will almost certainly seek government assistance.
President Trump floated the idea of redirecting some of the fees airlines collect with every ticket purchase, allowing the carriers to keep the money instead.
I’m not sure how much good this approach will do. If there are no passengers, there are no fees. No fees means zero benefit to the policy of redirecting the money.
True, for whatever people do fly, the fees may be redirected. But this won’t be much relief for the airlines.
The federal aid to the US airline industry after 9/11 took the form of a newly created Air Transportation Stabilization Board (ATSB).
Congress created the agency within two weeks of the terrorist attacks. Ten billion dollars were allocated for aid.
But it wasn’t a freely-given largess. In the end, only $1.8bn was distributed.
Qualifying was strict. Only seven carriers ultimately qualified: America West Airlines, US Air, American Trans Air, Aloha Airlines, Frontier Airlines, Evergreen International Airlines and World Airways. America West had to submit a revised application after the first one was rejected.
Applications from nine airlines were rejected, including United, one of the two carriers victimized by the 9/11 attacks. United applied twice and was rejected twice.
The ATSB had to determine that credit was not reasonably available at the time of the load guarantee or funding.
The government received warrants, stock options, common or preferred stock and other consideration for loaning money to the airlines.
Several airlines went out of business in the post-9/11 era. The impact of the three-day shutdown and extended depressed traffic made it impossible for airlines with weak balance sheets before the attacks to survive.
Other carriers went through bankruptcy reorganizations.
As one who was involved in the airline industry when 9/11 occurred, and who has been through several other global shocks, I can unequivocally say this is the worst crisis I’ve seen for the airline industry.
Airlines already are dropping like flies.