Congress to Pass $17 Billion Bailout of Airline Shareholders & Bondholders, to Top Off Prior Bailout. Industry Applauds, Airline Stocks Jump

Congress to Pass $17 Billion Bailout of Airline Shareholders & Bondholders, to Top Off Prior Bailout. Industry Applauds, Airline Stocks Jump

Top 4 airlines burned $45 billion on share buybacks since 2012. If airlines run out of money, Chapter 11 bankruptcy works. Airlines proved it.

By Wolf Richter for WOLF STREET.

Airlines in the US will get another $17 billion taxpayer-funded bailout if the $748 billion “bipartisan” stimulus proposal that the four most senior Congressional leaders are discussing this afternoon makes it into law.

There is a commitment now to pass something. Many items that either party wanted but that the other refused to yield on have been trimmed out of this proposal, including the $1,200 stimulus checks. But their airline bailout is in it.

Democrats and Republicans may not agree on much of anything these days, but they both love to bail out airline shareholders and bondholders. And that’s what this is – dressed up as payroll protection and airline support program.

The Democratic-backed $2.2 trillion stimulus package that the House passed at the end of September but that was not taken up by the Senate included $25 billion to bail out airline shareholders and bondholders. The airline industry has been lobbying with all its might to get this money. So now, it looks like they will have to make do with $17 billion.

This new bailout comes on top of the original stimulus bill, which was passed in March and which came with $25 billion in so-called payroll support for the airlines, an additional $25 billion in loans for passenger airlines, and over $10 billion in grants and loans for cargo airlines and aviation contractors. The payroll protection provisions expired on September 30, under the assumption that by then the airlines would be operating more or less back at normal.

But they’re not. Delta Air Lines, American Airlines, and United Airlines have warned in recent days about once-again declining bookings following the Thanksgiving surge of Covid infections. Airlines have reported spikes in cancellations. Leisure travel had picked up, but the very lucrative business travel and international travel remain in a zombie state. The V-shaped airline recovery that Wall Street had promised in late spring and early summer has gotten crushed

The number of passengers going through TSA checkpoints to enter the secured areas at US airports through December 14 has dropped sharply since late November. The chart shows the number of TSA checkpoint screenings in 2020 (red) and 2019 (green) per day (thin lines) and the seven-day moving averages (bold lines):

The daily checkpoint screenings are now down 68% (seven-day moving average) from where they’d been on the same day in the same week a year ago, the worst levels since early September:

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Wolf Richter

In his cynical, tongue-in-cheek manner, he muses on WOLF STREET about economic, business, and financial issues, Wall Street shenanigans, complex entanglements, and other things, debacles, and opportunities that catch his eye in the US, Europe, Japan, and occasionally China. WOLF STREET is the successor to his first platform… TP-Title-7-small-200px …whose ghastly name he finally abandoned in July 2014. Here’s the story on that. Wolf lives in San Francisco. He has over twenty years of C-level operations experience, including turnarounds and a VC-funded startup. He earned his BA and MBA in Texas and his MA in Oklahoma, worked in both states for years, including a decade as General Manager and COO of a large Ford dealership and its subsidiaries. But one day, he quit and went to France for seven weeks to open himself up to new possibilities, which degenerated into a life-altering three-year journey across 100 countries on all continents, much of it overland. And it almost swallowed him up.