The coronavirus pandemic continues to cause millions of dollars in losses for airlines around the world. With the passing of the CARES Act yesterday, US carriers have been granted a $50 billion bailout by the US government, and now they’re even looking to cooperate with each other while the pandemic continues.
As well as causing the deaths of thousands of people, coronavirus has effectively brought the global economy to a standstill. The travel restrictions put in place to slow the spread of the disease have meant that all but the most essential travel has been canceled, and many airlines are on the brink of bankruptcy as a result.
A lifeline for US carriers
Airline executives have repeatedly warned of imminent bankruptcy if the current travel restrictions stay in effect. America’s largest airlines are best placed out of any carrier in the world to weather the storm, but even they will struggle to stay afloat without cash.
The passing of the Coronavirus Aid, Relief and Economic Security Act by the US government yesterday ensured support for all vital sectors of the US economy with $2 trillion of funding. But the $50 billion earmarked for the commercial aviation industry comes with a couple of stipulations.
Because commercial aviation plays such an important role in the running of a healthy economy, the US government has asked its carriers to ensure two things. Firstly, while receiving financial aid from the government, US carriers must not lay off or furlough any of their employees. Secondly, they must not cancel services to any city currently on their route network.
These two stipulations have been included in the financial support package to ensure that US airlines continue to provide their fundamental services to the US economy – providing jobs and giving Americans a vital means of traveling around the country.
Unfairly skirting obligations?
The second stipulation of the CARES Act seems to have left airlines in a tricky situation. As reported by CNBC, the coronavirus pandemic reduced passenger numbers at US airports on 28 March by a staggering 91% compared to the same day last year.
As a result, demand for tickets on certain routes is now practically zero, but under the terms of the CARES Act, US carriers are obliged to continue operating all their normal flights. This would clearly be a massive waste of resources and government funds.
Airline executives have proposed a potential solution that would help reduce wasted resources – working together to provide services on smaller routes. Pooling passengers onto fewer aircraft on smaller routes would allow airlines to meet their obligations under the CARES Act, whilst reducing wasted resources and pressure on ATC.
An airline executive talking off the record with CNBC said, “Does it make sense for more than one of us to be flying to a city when there are only a few seats filled on each plane”?
Sharing flights between carriers would require approval from the Trump Administration and would require a way of calculating profit shares between airlines if it were to go ahead. But the proposed solution has raised questions about whether or not airlines will unfairly profit. They would still be receiving the $50 billion in financial support from the government, but also significantly reducing their financial output at the same time.