President of the United States, Donald Trump, has an interesting idea when it comes to helping out airlines. In a news conference on April 24th, he floated an initiative where the US government buys four or five years of airline tickets in bulk as part of an incentive to help out airlines.
Below is a video of the full news conference. His statements come at just after 10 minutes into the video.
President Trump claims that the US government is the “biggest user” of US airlines. As a result, the government should negotiate with airlines to buy tickets valid for the next few years at a 50% (or more) discount.
These comments come not too long after the US government provided aid to several US airlines. In total, these are billions of dollars of grants and loans to airlines. Although, this funding will only help airlines tide over through September. After that, if the situation is not any better, carriers may end up in a position where they need more government aid.
Government travel and commercial airlines
While many people know government travel for its fleet of swanky private jets like Air Force One, most employees end up flying commercial aircraft. Government travel is one of the most secure forms of revenue for airlines, unlike leisure passengers, which is why this would be the last resort for airlines. At a 50% discount, airlines will lose out on loads of future revenue to receive short-term financing. Which, at the end of the day, would only come in the worst-case scenario when airlines are desperate for cash.
It does, however, raise some interesting prospects. For one, how this would work out. Most likely, the federal government would purchase something similar to flight passes but for a given amount of travel. Origin and destination would probably be fluid, as would redemptions dates and times. However, airlines may seek blackout dates. But the government could strong-arm those carriers into dropping those requirements.
It would also be interesting to consider which airlines would take part in this. Low-cost carriers like Spirit or Allegiant may not benefit as much as full-service carriers. This is because low-cost carriers operate more seasonal and less frequent schedules than airlines operating on hub-and-spoke models. However, low-cost carriers will likely face even worse conditions if travel demand has not improved by September. Thus, it would not be too surprising to see even those airlines take a share of government travel.
Contracts and tickets
Contracts for flying are nothing new. Corporations with heavy international operations usually draw up agreements with airlines for a certain number of seats on a given route. Tech company, Apple, in fact, spends hundreds of millions of dollars each year for business class seats on United Airlines.
Ultimately, if any airline takes up the federal government on a program like this, it will likely mean that carrier is facing some dire circumstances and is desperately in need of cash. While the federal government has not launched this initiative officially, it does raise some interesting questions.
Do you think that the government should buy airline tickets in bulk at a discount? Let us know in the comments!