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Do Airlines Need More Government Aid Now That Vaccines Are Here?

Madhu Unnikrishnan

December 14th, 2020 at 2:18 PM EST

Travel may start to rebound in the months ahead as effective Covid vaccines are distributed and administered. That should mean the airline industry can breathe a sigh of relief — not so fast, the industry says. More government aid is needed to bridge the gap between now and when consumers start to travel in significant numbers.

Governments around the world have stepped up during the crisis, to the tune of $173 billion to airlines since the pandemic began, the International Air Transport Association (IATA) said. Aid has taken a variety of forms, from direct cash infusions, loans, payroll support, and subsidies for operating essential routes.

But IATA noted aid has been uneven around the world. Some governments, like Singapore, lavished financial support to airlines. Governments in Europe, the Middle East, Asia, and North America (most recently in Canada) have offered various degrees of support.

Others, like those in Latin America, have not given much at all. Peter Cerdá, IATA’s regional vice president for the Americas, told Airline Weekly that there is a lingering sense in the region that air travel is the preserve of the rich and therefore not as deserving of government support as other sectors.

Even in countries where the airline industry has received aid, much of it has expired, and airlines are angling for more. In the U.S., airline payroll support through the CARES Act federal stimulus expired in October, and more than 30,000 airline workers have lost their jobs. Airlines are angling for more aid to carry them through March, but Congress remains deadlocked on whether more fiscal stimulus is necessary at all.

IATA is calling for more worldwide and has recommended a variety of methods governments can use to support the industry. These include waiving taxes and fees; subsidizing routes; financial incentives to operate certain flights or providing a certain number of seats on a route; buying tickets directly to distribute to government employees or to citizens to stimulate future travel; and subsidizing tickets. The governments of Hong Kong, Greece, Thailand, and Cyprus, among others, have used these tools to stimulate their domestic travel industries, IATA notes.

These may be more palatable to the public now than further direct cash infusions to airlines. To cite one example, when Congress considered giving airlines more aid, the blowback on more aid to large corporations (while Congress dithered on extending unemployment benefits) was harsh and immediate. In Europe, aid to airlines is becoming politically untenable, and even the outspoken Ryanair CEO Michael O’Leary has derided it as unnecessary.

The conventional wisdom, reinforced by airline leaders around the world, is that vaccinations would save the day, and once enough people had been inoculated, travel would return. And that may be true, but the industry argues that it needs more aid until that critical mass of people begin flying again. “Any government stands to benefit by including proven stimulus measures into their economic recovery plans,” IATA Director General Alexandre de Juniac said. “When people travel, economies prosper and grow.”

Madhu Unnikrishnan

December 14th, 2020 at 2:18 PM EST

Photo credit:  Architect of the Capitol

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