Washington’s Wasteful Service Mandates Threaten the Airline Industry

You’d think that if Congress made it a point to bail out an industry with tens of billions of taxpayer dollars, it wouldn’t sabotage it at the same time.

Yet this is
exactly what is happening to airlines as a result of Washington’s
politics-first fixation with preserving low-traffic airports.

The travel sector
of the economy is struggling as a result of the coronavirus pandemic, and
airlines in particular are facing catastrophic declines due to cancellations and lost
business. The high overhead costs of plane maintenance and payrolls makes it
difficult for airlines to absorb the blow.

Congress gave the airlines a bailout following the last event-driven downturn for the industry, the 9/11 terrorist attacks.

While there were better alternatives to handouts in the current situation, it came as no surprise that airlines received special treatment in the recently enacted CARES Act.

Specifically, the
law contains $25 billion in loans and $25 billion
in grants for passenger airlines. The money does not come free of charge, and
the conditions are causing severe turbulence for the industry.

Congressional Democrats pushed for the grants, which, unlike loans, are not paid back, largely on behalf of airline employee unions. The law stipulates that airlines taking grants avoid layoffs and compensation reductions through Sept. 30.

There are good
reasons to view the effectiveness of this provision with skepticism, as there are ways for airlines to
game the system by cutting hours for part-time employees. These employees could
in turn file for unemployment benefits due to benefit expansions under the
CARES Act.

Another relevant aspect of the CARES Act is part of a long, bipartisan, and highly wasteful tradition: maintaining flights to dozens of little-used rural airports.

From a political standpoint, helping to keep an airport open with federal dollars is a way to curry favor with those who work at and frequent the airport, along with state and local elected officials.

This dates back to
the highly successful airline deregulation of the late
1970s. Some members of Congress were concerned that deregulation would harm
remote airports, and created the Essential Air Service program as a “temporary” subsidy.

This being
Washington, the “temporary” program is still going strong.

The program received
$56 million in the CARES Act, which is roughly one-sixth of its annual spending.
Essential Air Service is one of the foremost examples of unnecessary and
inappropriate federal spending, often subsidizing small flights to the tune of
hundreds of dollars per passenger.

Yet this was not
enough to satisfy legislators, who benefit politically from keeping obscure
airports open.

Section 4005 of
CARES dictates that airlines must maintain flight service as it stood in mid-March,
and specifically qualifies this by pointing to “small and remote communities”
and delivering medical supplies. The requirement extends all the way to March
2022.

The medical supply
delivery mandate is unlikely to impose a substantial burden, since cargo air
carriers perform this task as part of their normal business.

In contrast, the
rural service mandate means that airlines must run unprofitable and sometimes
empty flights just for the sake of appeasing the government. Small, niche
airlines are especially harmed by the one-size-fits-all burden.

For example, Sun
Country Airlines
submitted
a comment to the Department of Transportation
to point out that airlines with seasonal changes in businesses will be forced
to operate more flights than they would in a normal year, let alone during a
severe downturn. Several other airlines also sent comments to note the harmful
effects of this parochial airport protectionism.

Congress should
stop attempting to pick winners and losers in the economy, and that includes
airports.

The simple fact is
that commercial airports exist to benefit passengers. If there weren’t many passengers
using a given airport during the pre-pandemic economic boom, the airport
doesn’t make sense anymore. Washington shouldn’t waste public and private money
on airports that have been on the dole since the days of disco.

It makes even less sense to beggar the airline industry during a generational business downturn that is out of its control, for the sake of these tiny airports. The airports are already getting their own bailout in the form of the extra Essential Air Service money, so the service mandates for airlines are almost punitive.

The CARES Act was
passed in a hurried fashion and contains many flaws that are already harming
the economy. Congress should fix these flaws, including the service mandate for
airlines, as soon as possible.

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