Remember when the Big Three U.S. airlines carried out a three-year-plus campaign against Gulf carriers Emirates, Qatar and Etihad, accusing them of violating international air transport agreements by accepting more than $50 billion in state subsidies over more than a decade?
It's a figure that seems almost quaint now, considering that airlines globally have received $215 billion in government support during the one year of the Covid-19 pandemic, according to IATA.
And the country whose carriers have benefitted the most from state largesse is the U.S., where Congress last month passed a third round of payroll support to airlines, this time for $15 billion. In total, the federal government has now committed to supporting U.S. air carriers and the contracting companies they use for groundworkers with $58 billion in payroll support since the start of the pandemic, the large majority provided as grants, with a smaller portion rendered in the form of low-interest loans.
That 2015 to 2018 campaign by American, United, Delta and airline unions against the Gulf Three was often shrill, but ended in a whimper. The U.S. airlines had initially called for the federal government to block the Gulf carriers from adding any new U.S. routes until the subsidy issue was resolved. Ultimately, the White House entered into deals with Qatar and the United Arab Emirates which merely required those airlines to produce annual audited financial statements.
I don't expect there will be a counter diplomatic campaign waged against U.S. airlines now, whether by the Gulf carriers or anyone else. Airlines throughout the world have understandably had their hands out during the pandemic as they've fought to stay solvent. The International Civil Aviation Organization, a United Nations arm, said in January that the pandemic depressed global airline revenue in 2020 by $370 billion.
Delta Air Lines CEO Ed Bastian acknowledged during last month's J.P. Morgan Industrials Conference that robust federal support will enable U.S. airlines to come out of the pandemic relatively strong compared with foreign counterparts.
Delta president Glen Hauenstein added to that sentiment, noting a rash of bankruptcies and consolidations in the airline industry -- beyond the U.S. borders.
For sure, government aid hasn't been the only factor in determining which airlines are likely to survive the pandemic, or which ones will emerge with a balance sheet that is less battered than most. In general, the 10 primary mainline U.S. carriers entered the pandemic in strong financial condition.
That, too, is a contributing factor as to why all appear poised to survive the crisis, and do so without bankruptcy restructuring.
Nevertheless, consider Latin America, where governments have been stingy toward their airlines. Giant players Latam, Avianca and Aeromexico all entered bankruptcy early in the pandemic. Mexico's Interjet, while not technically shuttered, likely will never fly again.
The U.S. carriers, which have been supported so generously by taxpayers, should be grateful. But the carriers still face billions in new debt, and management will have to operate accordingly. In other words, taxpayer largesse isn't likely to result in something tangible for flyers, like more legroom in economy class. Still, I do hope that U.S. airlines, and especially the Big Three that waged that war against the Gulf carriers over alleged subsidies, will move forward with newfound humility. And with any luck, on some subtle level, perhaps that humility will result in a kinder U.S. airline industry than the one we had before the pandemic.