Airline Industry’s Bailout Request During COVID-19 Essay (Article)

Introduction

Amid the COVID-19 pandemic, the relationship between businesses and governments is challenged by the changing demand for different goods and services. While some corporations face increasing stress due to their essential position in the crisis, others are struggling to acquire any profit. The airline industry is among the latter group – plane tickets are being returned, and flights are being canceled due to the travel bans imposed in many countries.¹ Moreover, the fear of infection and people’s self-isolation lead to the whole industry’s continuously plummeting revenue. In the United States, Airlines for America, a representative for several large US airlines, appealed to the government and introduced a massive industry bailout. The article by Rapier analyzes the proposal, its potential outcomes, as well as the history of changing demand and its effect on the industry’s relationship with the government.

Article Summary and Review

The news piece describes the bailout plan that Airlines for America introduced to the US government in March. Rapier explains how the national airline industry has been affected by the pandemic. The demand for flights decreased to the point that several routes have been canceled entirely, as several countries closed their borders. It is also expected that the demand will continue to be low, thus making the financial crisis for these businesses a widespread problem that cannot be solved by short-term cuts.² Here, one can see how the fundamental economic concept of demand can influence the whole subset of the economy in a short span of time. Major crises affect the population’s preferences and decisions, thus substantially altering their purchasing behavior. The author provides a similar example – after the tragedy of September 11, the US airspace was closed, and the government passed a multibillion measure to help the industry.³ However, the current pandemic seems to be even more devastating, both socially and economically.

The recommendations proposed by the representatives include $29 billion of grants and $25 billion in unsecured loans.⁴ Moreover, carriers are expecting that the government will give them tax breaks. As a result, the industry believes that around $54 billion is the sum that is necessary to keep airlines safe from bankruptcy while COVID-19 continues to spread. Although the economic advisor to the White House, Kudlow, does not call this proposal a bailout, the features of one are apparent.⁵ A bailout is the type of financial assistance that can be provided to a company or country to save it from bankruptcy.

In this case, the resources are provided by the government to support an industry that is deemed essential for the country’s operation. Thus, the question lies in whether the airline industry needs this financial aid or whether their situation is not that urgent. Notably, by discussing previous bailout-like measures, the author shows that financial support does not always prevent bankruptcies and business closures. Thus, this article presents the arguments for and against this measure based on the current case and previous experiences.

Conclusion

The article by Rapier looks at the bailout proposal developed by Airlines for America to support carriers from bankruptcy. The multibillion measure is much larger than the one offered to airline companies after September 11. It is based on the dwindling demand for flights and cargo transportation – a concept that defines the market’s activities and decisions. Overall, this news’ analysis demonstrates that such economic choices are complex and require a substantial review of previous events, potential trends, and financial capabilities of both the government and affected businesses.

Bibliography

Rapier, Graham. “Here’s the Exact $54 Billion Bailout Plan that Airlines Are Demanding of the US Government as Coronavirus Wreaks Havoc on the Industry.”Business Insider, 2020. Web.

Footnotes

1. Graham Rapier, “Here’s the Exact $54 Billion Bailout Plan that Airlines Are Demanding of the US Government as Coronavirus Wreaks Havoc on the Industry,” Business Insider, 2020. Web
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