CLEVELAND, Ohio – The federal government approved $65 billion in taxpayer dollars be used for grants and loans in 2020 to help the nation’s air carriers weather the coronavirus pandemic – but that wasn’t nearly enough to cover industry loses.
And more relief is likely on the way in the next stimulus package, which could clear Congress next month. The big question is how long will the federal government be willing to continue the subsidies, an air industry analyst said.
“They’re already out there asking for the next one,” said Robert Mann, principal at R.W. Mann & Co. in New York.
Cleveland.com and The Plain Dealer contacted Mann this week after Cleveland’s airport chief, Robert Kennedy, expressed concern to City Council about the airlines that now operate out of Cleveland Hopkins International Airport.
The question we posed was what did the airline industry do with all those billions, and why was that not enough?
Here is what we learned.
Air travel nearly came to a halt when the pandemic took hold in March. Passenger numbers collapsed and airline revenues plummeted. Even with the subsidy from the federal government, the industry still had combined losses of about $22 billion in 2020, Mann said.
Eight air carriers that fly in and out of Cleveland Hopkins International Airport received $21.7 billion to cover lost revenues, according to U.S. Treasury records. The money allowed them to keep employees on staff, even though flights were greatly reduced. American Airlines, United Airlines, Delta Air Lines and Southwest Airlines – the four largest in the nation – got the most.
American, United and Delta all topped $5 billion in payroll support. Southwest topped $3 billion.
JetBlue got more than $950 million. The other three were less – Spirit, $344 million; Frontier $210 million; and Allegiant, $176.
The federal subsidies provided the air carriers with liquidity and in exchange, they pledged to keep people employed. Without it, thousands of workers likely would have lost their jobs, causing the economic downturn to worsen, Mann said.
None of the major airlines has recovered.
Business traffic, the bread and butter for airline revenues, has not returned, Mann said. Leisure travelers, passengers who shopping for the best deals, are a reason that airlines are keeping fares down across the country.
Meanwhile, many business travelers have switched to private jets.
“If you look around the world, it’s the same,” Mann said.
For 20 years, that’s been a trend. Folks who consider their time of high value began to go private – flying out of smaller airports that were easy to get in and out of and offered fewer headaches than busy airport terminals.
When the pandemic hit, health concerns just fueled the trend.
New Jersey’s Teterboro Airport, across the Hudson River from Manhattan and not far from Mann’s Long Island base, has maintained strong private jet service for businesses throughout the pandemic. In 2020 it was the busiest business aviation airport with 36,508 departures, Forbes reported.
The question is whether that business traffic ever return, Mann said.
Argus International, an aviation-focused consulting company, predicts year-over-year business-related air travel activity should exceed the 2020 monthly level in June by 26%. That would still be less activity than in June 2019.
And even though overall passenger numbers have begun to tick up on domestic air carriers, they are far from the pre-pandemic levels of 2019.
Kennedy, director of Cleveland’s airport system, expects about 5.2 million passengers to use Cleveland Hopkins this year, up from 4.1 million in 2020, but only about half of what was expected before the pandemic hit.
“I don’t see the industry recovering to levels of 2019 at least until the end of 2022 and possibly the end of 2023,” Mann said.
Until then, air carriers will continue to rack up losses, burning through tens of millions of dollars a day in cash, Mann said.
“It’s going to go on forever until the demand returns,” Mann said. “The question is how long do you want to keep dosing it like that.”
More from Cleveland City Hall
$46 million in federal coronavirus relief wasn’t enough to cover revenue lost at Cleveland airports
Ohio Attorney General Dave Yost asks Supreme Court to suspend indicted Cleveland Councilman Ken Johnson
Former whistleblower at Cleveland Hopkins International Airport suspended for violating security rules
Cleveland considering a new recycling program that would require residents opt in to participate
Cleveland City Council approves landmark status to help century-old fruit auction house become a distillery
___
(c)2021 The Plain Dealer, Cleveland
Visit The Plain Dealer, Cleveland at www.cleveland.com
Distributed by Tribune Content Agency, LLC.
