Northwest Arkansas Democrat-Gazette
How airline carriers can survive
The airline industry has been shaken to its core by the pandemic, but Nicholas Calio is adamant that all the major U.S. carriers will survive. Calio is a longtime Washington hand who served in two White Houses. Now he is president and CEO of the trade group Airlines for America, or A4A. In March, airlines got $25 billion in payroll help plus up to $25 billion more in low-interest loans from Washington. But travel didn’t bounce back like hoped, the airlines want another $25 billion. Critics say they should have saved more money when they were making record profits instead of buying back their own stock to please shareholders. Calio recently spoke with The Associated Press about federal aid, the outlook for the industry, and whether any U.S. carriers will file for bankruptcy protection because of COVID-19.
Why should airlines get more taxpayer money now? Shouldn’t they have set aside more money when times were good?
On March 1, all of A4A’s members were considered to have fortress balance sheets that were designed to withstand an event three times worse than 9/11. In the last decade, passenger airlines spent $424 billion on their workforce, $143 billion on fleet and other product investments, they retired $91 billion in debt and returned $56 billion to shareholders (in dividends and share buybacks). So the vast majority of their profits went into the company and into their employees.
Have airlines managements learned from the pandemic to be better shape next time?
They were in very good shape. That’s why so many people were flying, that’s why there are so many new airplanes, so much new technology on the airplanes and in the hands of passengers. Nobody did anything wrong here, and they got wiped out in three weeks because no one expected something like this.
Will any big U.S. airlines go into bankruptcy?
No. Everyone has done a good job of fortifying their liquidity. The first CARES Act (in March) helped that to happen. So why do you need more federal aid? What we need now is to keep our employees in place to the greatest degree possible. You can open a restaurant, bring in the chef, bring in the serving staff and start up again in a matter of days. It’s a very different story for airlines. There is a constant recertification and retraining process that goes on for airline employees because of the safety aspect of it.
What will the industry look like in 2023 or 2024?
I think that the carriers themselves will be smaller, but if traffic picks up as we expect it do there is going to be a process of building back up. It will take a while to get back to 2019 levels. Those were record levels. It looked in January and February like we were going to exceed those levels.