- Why do airlines want another federal bailout?
- Air navigation service providers’ revenue losses
- Our fragmented approach to protecting airports from drones
- Florida airport considering a long-term lease
- FAA evacuation standards faulted by Inspector General
- New data on aviation’s climate change impact
- News notes
- Quotable quotes
Why Do Airlines Want Another Federal Bailout?
As I write this during the last week of October, Congress has not enacted either a $25 billion airlines-only bill or the House-passed coronavirus relief bill that included $25 billion in grants to prevent airline employee furloughs. And the Senate has adjourned until Nov. 9 so immediate action on another bailout seems unlikely. Since the previous program expired on Sept. 30, U.S. airlines have furloughed an estimated 40,000 employees, according to Aviation Daily (Oct. 2). That article pointed out that the furloughs were far fewer than the airline unions had warned about, in part because most carriers had already persuaded many employees to take early retirement or other voluntary departures.
From a business perspective, reduced staffing allows airlines to reduce flight frequencies closer to actual travel demand, which is still only about 40 percent of 2019 figures. And the proposed $25 billion in new airline grants would be for only six months, years before any conceivable recovery to pre-pandemic airline travel figures. Here is a sampling of recent headlines from knowledgeable authors and respected publications.
- “Don’t Be Misled: The Numbers Don’t Signal a Comeback in U.S. Air Travel Demand,” Dan Reed, Forbes, Oct. 22
- “IATA Warns Airlines Will Not Turn Cash Positive Until 2022,” Karen Walker, Aviation Daily (Sub Req’d), Oct. 7
- “ATAG Sustainability Action Plan Sees COVID-19 Impact Out to 2050,” Victoria Moores, Aviation Daily (Sub Req’d), Oct. 1
- “Industry ‘Never Going to Get Back’ to Pre-COVID State, Walsh Says,” Helen Massy-Beresford, Aviation Daily (Sub Req’d), Sept. 25
I can understand why airline unions continue pressing for federal grants to bring their furloughed members back onto the payroll, even if there is little or no work for them to do. But why on earth do airlines want to burden themselves with exaggerated payrolls and pressures to keep operating flights that make no economic sense?
A plausible answer to this question is provided by a study from the Mercatus Center at George Mason University— “The Economic Case Against a Second Airline Payroll Bailout.” Researchers Veronique de Rugy and Gary D. Leff make the case I’ve made—that since an economic and industry recovery to pre-COVID-19 air travel conditions is far off, it makes no sense to preserve this particular set of airline jobs for another six months.
But besides this, the authors crunch the numbers to reach a little-reported conclusion. They use 35,000 as the number affected (rather than the more recent estimate of 40,000), but that makes little difference. Assuming the average furloughed employee gets $100,000 per year but is being supported for six months by the bailout, the cost of doing that would be just $1.75 billion. So where would the other $23.25 billion in federal taxpayers’ money go? Their answer is “the greatest share of these subsidies would flow to creditors and shareholders.” Seen in this light, one might see the airline unions as arguing for general airline corporate bailouts.
And it’s not as if there were no other sources of funding and financing for these companies. Airlines continue to tap the private capital markets, using assets such as aircraft, slots, and frequent-flyer programs as collateral for loans. And on Sept. 30, seven airlines finalized loans from the U.S. Treasury, as provided for in the $2.2 trillion Coronavirus Aid, Relief, and Economic Security Act, also known as the CARES Act, last spring. The interest rates on these loans ranged from LIBOR + 2.5 percent to LIBOR + 3.5 percent (for financially weak American). Three relatively financially strong airlines did not take part in these loans: Allegiant, Delta, and Southwest.
I will leave it there, but in the interest of full disclosure, I am a lifetime Platinum member of American’s AAdvantage program and have a gazillion miles in my account. Should American go belly-up, I would be negatively affected. But that does not lead me to support airline taxpayer bailouts.
Dealing with ANSP Pandemic Revenue Losses
Last week, I did a lengthy interview with an aviation reporter interested in examining how air navigation service providers (ANSPs) are coping with massive reductions in revenue due to 2020’s huge decrease in air travel. Nearly all ANSPs charge en-route and terminal fees to aircraft operators, and most are self-supporting from that revenue stream. In the United States, the FAA gets 90 percent of its revenue from aviation user taxes, so it faces a comparable problem.
In both Europe and the US, governments have suspended the collection of most aviation user fees/taxes, to help airlines struggling to resume air service. But that makes the ANSPs’ revenue problems even worse. And while quite a few governments have made large bailout payments to airlines and in some cases to airports, ANSPs’ funding shortfalls have received far less attention. And that is exactly backward, I suggested to the reporter.
An ANSP has to maintain in operation perhaps 80-90 percent of the airways during a prolonged emergency such as COVID-19. Airlines can, and have, cut back to 30 percent and more recently 40-to-50 percent of pre-pandemic flights, but are still flying the majority of their networks. So in the absence of government bailouts, airlines could furlough up to half their staff, to conserve cash until more passengers return to flying. The same is true of airports. But that simply does not work for ANSPs, which have to ensure that the networks are properly served.
Therefore, it occurs to me, what commercial ANSPs need is some kind of catastrophe insurance. Normal insurance can cover an occasional disaster (such as a crash due to an air traffic control failure), but an industry-wide catastrophe such as this global pandemic is assuredly not covered by normal insurance. Having lived most of my life in either earthquake country (California) or hurricane country (Florida), I am familiar with the relatively new phenomenon of catastrophe bonds (often called cat bonds). They are high-risk, non-investment-grade bonds that pay off only in the event of a catastrophe of a certain magnitude. During the short term of a cat bond (e.g., 3 years), the bond pays a high-interest rate, but if the pre-defined catastrophe occurs, the principal amount of the bond goes to the insured party. That party is typically a reinsurer (such as Swiss Re) that reinsures conventional insurers. Cat bonds came into existence following the devastating 1992 Hurricane Andrew in Florida and the market is now well-developed.
Nav Canada is the only ANSP I know of that has, from the outset, maintained a Rate Stabilization Fund—a kind of rainy-day fund to help cover expenses during recessions when its air traffic control (ATC) fee revenue decreases. That fund allowed the company to avoid rate increases during the Great Recession—but it is no match for a global pandemic.
Would there be a market for ANSP cat bonds? The most likely customers would be the insurers of commercial ANSPs ENAV (Italy), NATS (United Kingdon), and Nav Canada, since they are less likely to get government bailouts during a catastrophe. But if reinsurers and other issuers of cat bonds provide such bonds for those ANSPs, the concept might then spread to others, reducing the need for uncertain government bailouts (which few ANSPs seem to have received, despite their greater need than airports and airlines). This is a topic that needs further discussion and development.
America’s Fragmented Approach to Protecting Airports from Drones
Most everyone in aviation remembers the 2018 drone intrusions that closed down London’s Gatwick Airport. Whether motivated by hacking, protest, or terrorism, drone intrusions could shut down airports or even cause crashes (via ingestion of a drone into an airliner’s jet engine). As a result, Congress took action—as part of the 2018 FAA reauthorization law, it required the FAA to test counter-drone systems at U.S airports. FAA is underway on that project, but existing federal laws create something of a legal minefield to actual implementation.
On Aug. 21, FAA released a call for white papers from vendors of counter-unmanned aircraft (C-UAS) systems. Its current plan is to evaluate at least 10 such systems, assuming enough qualified providers are interested. The initial testing will take place at Atlantic City International Airport (ACY), where the FAA Technical Center is located. Those systems that meet all of FAA’s objectives will be “graduated” and could be assigned to be tested at another airport for 14 months. The 2018 legislation also called for FAA to set up an aviation rulemaking committee (ARC) to assist it in developing standards for certifying C-UAS systems; that ARC had not yet been created, as of reporting in an article in Aviation Week’s Aug. 31-Sept. 13, 2020 issue.
But how complex the actual use of C-UAS systems for airport protection will be is evident from other recent actions. On Aug. 17, four agencies issued a joint advisory to airports interested in C-UAS implementation. Besides FAA, this included the Federal Communications Commission (FCC), Department of Homeland Security(DHS), and the Department of Justice (DOJ). That’s because all these agencies deal with laws that are related to tracking and disabling a drone. Congress has not authorized the FAA to use C-UAS systems to protect aviation facilities. The only agencies so far authorized are defense, energy, DOJ, and DHS. Different federal laws affect the detection and tracking of drones compared with “mitigating” them (intercepting or disabling their communications).
For example, federal criminal laws relating to surveillance (such as the Pen/Trap Statute and the Wiretap Act) restrict certain kinds of surveillance, but detection systems using reflected signals (e.g., radar, lidar) may not run afoul of those laws but must comply with existing FAA and FCC regulations. And when it comes to intercepting or disabling a drone, there are criminal prohibitions on intercepting communications, damaging an aircraft, or damaging a “protected computer” used in interstate commerce. And jamming or spoofing communication between the drone and its operator could be prohibited by the Computer Fraud and Abuse Act and other laws that prohibit interfering with the operation of a satellite and destroying communications lines. So it looks as if the ARC will have a massive task on its hands figuring out not only regulations but exemptions to various federal statutes that will be needed in order for C-UAS systems to protect U.S. airports.
Yet despite these legal complexities, some airports apparently have C-UAS systems in place. At FAA’s recent UAS symposium, the head of the FAA Office of Airport Safety and Standards, John Dermondy, “acknowledged that some U.S. airports have already deployed C-UAS systems, but he declined to say which ones.” One that is known is the Transportation Security Administration’s drone-detection testbed at Miami International Airport. Moreover, the Aviation Week article noted that four years ago “FAA and other agencies” tested counter-drone technologies at ACY, DFW, and JFK airports.
Also relevant is that in October 2019 the National Security Council approved a concept of operations (CONOPS) for protecting the country’s 30 largest airports. Under the CONOPS, the lead federal agency would depend on the intent of the drone intruder—which is unlikely to be discernable when the need for action arises suddenly. If the threat was terrorism, the Justice Department would lead. Why? The Department of Defense could provide a C-UAS system but could not operate it, due to the Posse Comitatus Act. And yet we have the Transportation Security Administration (TSA) as part of yet another agency, DHS. From what little has been made public about this CONOPS, it seems unwieldy and disjointed.
Florida Airport Considering Long-Term P3 Lease
In Florida, the Punta Gorda airport board is considering entering the FAA’s Airport Investment Partnership Program (AIPP), under which it could solicit proposals for a long-term public-partnership (P3) lease of the airport, reports Inframation News in its Oct. 8 and 15 issues. The airport’s governing body—the Charlotte County Airport Authority—has been in contact with people who were involved in the successful P3 lease of Luis Munoz Marin Airport in San Juan, Puerto Rico, in 2013.
A statement released by the airport authority states: “Value that has been created in an airport asset can be monetized to produce a significant upfront payment and an annual ongoing revenue share for other Authority uses.” And the authority is considering “possible use of proceeds” if it decides to go forward.
Commissioner Paul Andrews briefed the airport authority on documents submitted to FAA as part of the San Juan P3 lease by winning bidder Aerostar Airport Holdings. He was also scheduled to discuss a publication on airport P3s from the law firm Kaplan Kirsch Rockwell.
Another scheduled presentation was from Andy Vasey, CEO of Vasey Aviation Group—previously chief development officer for Aerostar Airport Holdings. He is currently the Charlotte County Airport Authority’s real estate developer. At a previous authority meeting, Vasey was joined by Patrick Langan, a senior official of Partners Group, one of the bidding teams for last winter’s process exploring a public-private partnership lease of Lambert-St. Louis International Airport. Partners Group had teamed with ASUR and AECOM.
At its Oct. 14 board meeting, the authority’s board voted 4-1 to authorize CEO James Parrish to negotiate a new contract with Vasey Aviation Group to continue exploring a long-term P3 lease via FAA’s AIPP process.
The Punta Gorda Airport is on the west coast of Florida, between Fort Myers and Sarasota. Its 2019 passenger volume was 1.6 million.
FAA Evacuation Standards Faulted by Inspector General
Prior to COVID-19, my Reason Foundation job typically including making two or three airline round trips each month. As airlines continued to reduce seat pitch in recent years, as passengers kept getting larger, and as reports of emergency evacuations showed many passengers ignoring the rules (e.g., taking carry-ons with them, talking on their phones rather than paying attention to getting out quickly), I welcomed both Congress asking FAA to review things like seat pitch and a congressional request for the Department of Transportation Office of Inspector General (OIG) to look into current evacuation standards.
The findings in the OIG report, “FAA’s Process for Updating Its Aircraft Evacuation Standards Lacks Data Collection and Analysis on Current Evacuation Risks,” dated Sept. 16, 2020, are disturbing and dismaying.
Aircraft manufacturers are required to document that each model aircraft they produce meets FAA evacuation standards; those with more than 45 passenger seats must be able to be fully evacuated in 90 seconds or less under specific test conditions. Back in the 1950s, when I was growing up in an Eastern Air Lines family, individual airlines were required to do evacuation tests, using employee volunteers. My family never participated, but I wondered about how objective those tests were. And it turns out, OIG has similar concerns about today’s manufacturer-based tests.
To begin with, the large majority of manufacturer certifications since 1980 have been based on analysis rather than actual tests, as permitted by FAA (see Figure 3 on p. 18 of the report). This trend coincides with the changing demographics of airline passengers and the increase in seats and reductions in seat pitch. Second, FAA only updates its evacuation standards in response to a crash that it decides has called into question some aspect of its then-current standards. And OIG points out that the last such crash took place in 1991, when a U.S. Airways 737 landed on top of a commuter plane at Los Angeles International Airport, causing a large loss of lives.
Moreover, FAA does not systematically collect data on actual evacuations. National Transportation Safety Board (NTSB) accident reports sometimes do include such data, but FAA does not use it. Table 2 in the report summarizes evacuation findings in five such accidents from 2009 through 2015. All five took longer than the standard 90 seconds, ranging from 108 seconds to 300 seconds. In four of the five cases, NTSB noted passengers trying to take carry-ons off the plane, and cited others using their phones while exiting or opening exits before assessing outside conditions; in two cases passengers started exiting before the cockpit crew shut down the engines. Dear FAA: weren’t these evacuations serious enough to suggest re-evaluating current standards?
Also, the OIG investigators found that the FAA does not save the results of manufacturers’ evacuation tests or analyses. It also does not limit the age of the data that Boeing and Airbus can use in their analysis, which can be “decades old.” Table 3 in the report reviews the age of data used to approve evacuation analysis of the top 10 aircraft in the current U.S. airline fleet—mostly various 737- and A320-family planes. While the data in a few of these are only one to three years old, many range from 8 to 16 years old, and one (Airbus 320 Max) used 28-year-old data. The investigators also found that “FAA certified 10 aircraft models based on inaccurate data or allowed manufacturers to exclude the evacuation times of some passengers and crew participants when determining exit times.”
It’s a pretty damning report, so I was underwhelmed by OIG’s two gentle recommendations. They are:
- Develop and implement a systematic process to regularly collect and analyze data on emergency evacuations to determine whether evacuation standards need to be revised or updated based on current risks.
- Develop a policy or procedures to maintain and analyze a record of critical data from aircraft manufacturers’ evacuation demonstrations and analyses to identify risks and ensure data used in analyses and computer modeling are accurate and up to date.
Given such a mild reprimand, FAA agreed to do both.
P.S.: Congress in the 2018 FAA legislation also called for FAA’s Civil Aeromedical Institute to conclude and publish its research on aircraft evacuation, which is expected by late 2020 or early 2021. The OIG report did not mention this.
New Data on Aviation’s Impact on Global Climate
There’s some good news and bad news for the airline industry in a study released last month that I think is the most comprehensive scientific assessment to date of the various atmospheric impacts of aviation on climate change. The study was released by Manchester Metropolitan University and led by its climate scientist David Lee.
One headline finding is that aviation’s climate-relevant emissions—CO2, nitrogen oxides, and contrails—nearly doubled between 2000 and 2018. But aviation’s percentage contribution has remained about the same, at 3.5 percent. That’s because many other sources have also increased significantly during that nearly two-decade period of global economic growth. The study also confirmed that the largest aviation contribution is the formation of contrails, as exhaust particles and water vapor lead to the formation of the ice crystals of which contrails are composed. But while contrails are still the largest component, they cause only about half as much warming impact as previously thought.
CO2 remains the second-largest contributor, responsible for about 60 percent as much as contrails. The smallest of the three contributors is nitrogen oxides, with about 30 percent of the impact of contrails.
The good news, according to some experts, is that fixing contrails is the easiest of the three to achieve. As I reported in the February issue of this newsletter, the Center for Air Transportation Research at George Mason University (Lance Sherry and Terrence Thompson) released a detailed study explaining contrail formation and analyzing the cost and potential impact of a number of mitigation measures. By far the most cost-effective would be to change the altitudes of the 15 percent of (U.S.) flights that fly in conditions that lead to the formation of contrails. They estimate that a 2,000-foot increase in cruise altitude for those flights would reduce contrail impact by 62 percent, while a 4,000-foot increase would reduce it by 92 percent. This would require better meteorological data in flight planning, but its cost in terms of fuel burn and flight time would be small.
The findings on contrails are also important for the potential use of hydrogen as a replacement aircraft fuel. Yes, its combustion would produce no CO2 and no nitrogen oxides—but lots of water vapor ready to turn into ice crystals—i.e., contrails. But the same remedy—slightly higher altitudes—would apply to hydrogen-fueled planes, as well.
Sources:
- D.S. Lee, et al., “The Contribution of Global Aviation to Anthropogenic Climate Forcing for 2000 to 2018, Atmospheric Environment, September 2020
- Lance Sherry and Terrence Thompson, “A Primer on Aircraft Induced Clouds and their Global Warming Mitigation Options.”
First eVTOL Certification Under Way
Joby Aviation’s pioneering electric VTOL air taxi is on the road to FAA certification, according to an exclusive report in Aviation Week’s Sept. 28-Oct.11 issue. The article provides photos and details of Joby’s six-motor S4 aircraft, designed to transport four people plus its pilot. In 2018, Joby applied to FAA for certification of the S4 under Amendment 64 of Part 23 airworthiness standards. That amendment opens up opportunities for novel designs, within the scope of the Part 23 standards that apply to general aviation aircraft. Given the newness of such designs, Joby is expecting the type certification by the end of 2023.
Autonomous Cargo Aircraft Being Tested
Two start-up companies have outfitted Cessna 208 Caravans with autonomy platforms, to enable these small cargo carriers to operate without onboard pilots. Reliable Robotics, founded by former SpaceX and Tesla engineers performed its first automated landing on June 30, 2020. Competitor Xwing has completed more than 70 autonomous flights with its Caravan, equipped with the company’s own Autoflight system. It has acquired a small-cargo operator and plans to begin piloted flights to collect enough data to get certified for remote-pilot operation.
Artemis Accords Pave the Way for Commercial Space
Seven national governments have joined the United States in agreeing on the NASA-drafted Artemis Accords—principles for peaceful, commercial activity in space. The signatories are Australia, Canada, Italy, Japan, Luxembourg, United Kingdom, and the United Arab Emirates. The accords include recognition of claims to extract resources from the moon, asteroids, and other planets.
Breeze Announces Scheduled Airline Service Plans
David Neeleman’s ambitious low-cost carrier Breeze will begin scheduled domestic flights in March 2021, the company announced at the end of September. The first routes will connect an unnamed southeastern city to four points in the northeast, and from another airport further south to four other points. By July 2021, it says it will launch service from a third airport in the southeast. Service will begin with Embraer E-190/195 aircraft, with Airbus A-220 planes joining the fleet starting in August 2021. The business plan calls for providing low-cost service to mid-size markets that have been “abandoned” by legacy carriers.
10 Best U.S. Airports: Conde Nast Traveler
The travel publication has announced its 2020 Readers’ Choice 10 Best Airports in the U.S. In order from number 1 to 10, they are: Savannah Hilton Head, Indianapolis International, Palm Beach International, T.F. Green (Rhode Island), Portland (OR) International, Tampa International, Minneapolis/St. Paul, Bradley International, Charleston, and Austin-Bergstrom International Airport. Congratulations to all.
Heathrow Asks for Rate Increase
Heathrow Airport Limited (HAL) has requested an upward revision of its regulatory asset base to enable it to recover an estimated $2.2 billion loss in revenue from 2020 and 2021, due to the drastic reduction in air travel. Regulatory agency Civil Aviation Authority (CAA) says that the current regulatory structure can be revisited in the event of “exceptional circumstance,” but HAL’s airlines are already protesting. The CAA’s industry consultation will continue through Nov. 5th, after which it will decide what to do.
Alternative to ADS-B for Drones
UK technology company RelmaTech is proposing that its digital Secure Integrated Airspace Management System (SIAM) be used to manage drone traffic rather than Automatic Dependent Surveillance-Broadcast ( ADS-B ), since the latter operates in a frequency band that would be overloaded if applied to millions of low-altitude drones. RelmaTech says that SIAM would also be more secure from interference and spoofing than ADS-B.
Passengers Spending More at Airports
Two international airport CEOs told the Virtual World Aviation Festival last month that passengers who are flying are spending more retail dollars at their airports than prior to the pandemic. Dubai Airports CEO Paul Griffiths and Amsterdam Schiphol CEO Dick Benschop both said that per-passenger spending at their airports has increased over last year’s levels. With less crowding in terminals, passengers apparently have more time and inclination to shop.
Hong Kong ATC Blocking Taiwan Flights
The Taiwanese government announced on Oct. 16 that Hong Kong air traffic control told Taiwan that it was dangerous for aircraft to operate to Taiwanese islands in the South China Sea. China has recently carried out military exercises near the Pratas Islands in the northern part of the South China Sea. A regular Taiwan charter flight to the islands had to turn around based on the warning from Hong Kong ATC. The Taiwan Civil Aeronautics Administration released a transcript of the conversation between the controller and the pilots. The Hong Kong controller acknowledged that they have not issued a notice to airmen (NOMAN) about this airspace.
Zurich Airport Wins Concession for Second Delhi Airport
On Oct. 7, the Indian state of Uttar Pradesh announced a 40-year concession under which Zurich Airport will design, build, finance, operate, and maintain (DBFOM) a second airport to serve the national capital, Delhi. Flughaven Zurich, AG was selected as the preferred bidder for the Delhi Noida International Airport. Besides its flagship airport in Switzerland, the company is involved in airport concessions in Brazil, Chile, Colombia, and Curaçao. The first phase of the new Indian airport will have a capacity of 12 million annual passengers and a single runway.
Vinci Airports Testing Facial Recognition
The world’s fifth-largest airport company, with 45 airports, Vinci Airports has begun a major test of facial recognition technology to streamline passenger travel from airport arrival to aircraft boarding. The one-year test is now under way at Lyon St. Exupery airport in France. Passengers may enroll at home, using the company’s app. Facial ID will be usable at every step of the airport process, with an estimated time saving of 30 minutes, thanks to fast-moving dedicated lanes.
Problems for Planned New Manila Airport
The $10 billion P3 project to build a new airport for the capital city of the Philippines is on hold. The lead company in the project consortium—China Communications Construction Co.—is blacklisted by the U.S. government for its role in building artificial islands in international waters of the South China Sea, some of which are claimed by the Philippines. In addition, the Philippine Navy has raised concerns about the airport being built on a site now occupied by its Sangley Point naval station, whose purpose is to guard Manila. These concerns have led to the consortium not yet completing its final post-qualification submissions.
Scottish Remote Tower Plans Under Attack
The plan by Highlands and Islands Airports Ltd. (HIAL) to consolidate control tower operations into a remote tower center are now facing pushback. Controllers’ union members do not want to relocate to the planned new center, and some local officials are objecting to local job losses. Both parties are alleging that remote towers are unproven and hence unsafe. The protests have caught the attention of several MSPs (legislators), who may seek legislation to forbid the plans, since HIAL is a government-owned company.
New Berlin Airport Will Open October 31
This time, for sure, it’s real. The more-than-a-decade-late Berlin Brandenburg Airport Willy Brandt has a firm opening date of the last day of October. Flughafen Berlin Brandenburg GmbH received its official operating certificate on Oct. 1. The existing Berlin Tegel Airport will close on Nov. 8, after all of its tenants have relocated to the new airport, designated BER. Actually, what is new is the trouble-plagued terminal. The airfield is the former East German airport Schoenefeld, which has continued some operations since re-unification, using its old terminal on the opposite side of the airfield.
China Plans Expanded Loran as Part of GNSS Backup
GPS World reports on a paper released in August 2020, “High-Accuracy Positioning Based on Pseudo-Ranges: Integrated Difference and Performance Analysis of the Loran System.” The paper reinforces previous evidence about China’s plans for GNSS resiliency. At the 2019 Stanford University PNT Symposium, Xiaochun Lu of China’s National Time Service Center outlined plans for a “comprehensive” position, navigation, and timing (PNT) system, including new low-orbit satellites, inertial systems, local positioning systems, and Loran.
“Think of what the big airlines do. They have complicated fleets and inefficient operations so that they can serve tiny cities, medium-sized cities, and large cities. They offer cheap basic economy fares to compete with low-cost carriers and three-digit fares to those who can make their company pay for that. They are trying to be everything to everyone, and in what other industry does this work? Morton’s doesn’t try to be McDonald’s and vice versa. Car companies don’t manufacture trains and planes. Target isn’t Nordstrom or Nordstrom Target. By starting first with who is the customer they can best serve to be profitable, [airlines] would make different decisions about hubs, fleets, network, product, and distribution. This is what the low-cost carriers do so well.”
—Ben Baldanza, “Layoffs at Big Airline Can Lead to Longer-Term Opportunities,” Forbes.com, Oct. 5, 2020
“Zombie firms have proliferated in rich countries. Covid-19 will make killing them off all the harder. . . . Lending money to a poor prospect is less painful if the bank pays little in funding costs. Banks with weak balance sheets—often the result of low profitability itself linked to low interest rates—are more prone to backing zombies. Extending new loans and pretending they will be repaid avoids recognizing losses, at the risk of compounding them.”
—“The Corporate Undead,” The Economist, Sept. 26, 2020
“For the past six months, American taxpayers have spent $25 billion covering the payroll obligations of passenger airlines. No other Fortune 500 companies—including restaurant groups, transportation firms, hotel chains, or entertainment businesses—have received taxpayer-funded grants. The excess capacity of the airline sector will not be resolved in the near future, and continuing to force the entire payroll obligation onto the taxpayers is not sustainable.”
—Sens. Mike Lee (R, UT) and Pat Toomey (R, PA), “U.S. Senate Republicans Object to Proposed Airline Relief,” Aviation Daily, Oct. 9, 2020
“When governments provide free insurance against poor or irresponsible investments and market decisions, expect an increase in poor decisions with an expectation that taxpayers will bail them out.”
—Andrew Charlton, “Competing Visions of the New Require Visions of Competition Law,” Aviation Intelligence Reporter, October 2020