Airline CEOs explain flight cancellations to Congress after taking $54 billion in taxpayer aid

Top airline executives on Dec. 14 told a Senate panel that a tight labor market and difficulty convincing some workers to pick up shifts contributed to mass flight cancellations this year, despite the $54 billion in taxpayer aid the carriers took to cover their labor costs when travel demand collapsed in the pandemic.

The CEOs of American Airlines, United Airlines and Southwest Airlines, and Delta’s chief of operations testified before the Senate Committee on Commerce, Science, and Transportation that the aid helped them survive the crisis and that they’re now ramping up hiring.

Senators during the more than three-hour hearing questioned executives on airlines’ hiring trouble, 5G, fuel availability, myriad fees and vaccine mandates though it was called to assess the industry’s bailout, its largest.

“I can sum up the [Payroll Support Program] in two words: It worked,” said Southwest CEO Gary Kelly said.

U.S. airlines lost a record $35 billion last year but executives say the Payroll Support Program, which prohibited them from laying off workers, was a bridge to get them to the point when air travel demand started to recover in earnest. Travel at the start of the pandemic fell more than 95%.

“It’s not an exaggeration to say the program saved the airline industry, which Congress and the administration recognized as critical infrastructure that is as essential to the economy as it is unique,” American’s CEO, Doug Parker, wrote in his testimony.

Alaska Airlines CEO Ben Minicucci said in written remarks that by “keeping employees on staff, it reduced the time that would have been required to train people coming back to work – an effort that takes months and significant resources.”

While airlines that accepted the aid couldn’t lay workers off, they significantly reduced head count by urging employees to take voluntary measures like buyouts, leaves of absence or temporarily idled workers in exchange for reduced pay. The payroll aid was mostly in the form of grants that don’t have to be paid back as well as some loans.

Staffing shortages
When demand returned faster than expected, a shortage of staff exacerbated routine problems, like bad weather, and contributed to hundreds of flight cancellations when travel demand took off this year. Airlines say they are adding staff as quickly as possible to cater to the increase in air travel.

The CEOs of Southwest and American, which each had operational meltdowns this fall that derailed the travel plans of thousands, said it has been difficult to get workers to pick up additional shift, a trend that makes it harder for airlines to recover from disruptions.

Sen. Maria Cantwell, D-Wash., the committee’s chairwoman, in July wrote to major airline executives, raising concerns about staffing problems’ role in flight disruptions. “This reported workforce shortage runs counter to the objective and spirit of the PSP, which was to enable airlines to endure the pandemic and keep employees on payroll so that the industry was positioned to capture a rebound in demand,” she wrote.

In prepared remarks ahead of the hearing, Cantwell said the committee will hear from industry leaders on whether the aid worked. She said the payroll aid kept airline workers on the job and helped airlines increase service. “If you look at how the airline workforce was retained, how quickly flights were restored and the boost aviation gave to the US economy the answer is yes,” she said.

At Dallas-based Southwest, 15,200 workers, or 25% of its staff, accepted a voluntary program, with 4,500 of them leaving the company permanently. It now aims to hire 8,000 employees in 2022 on top of 5,000 new workers this year.

American said its hiring goal is 18,000 next year after adding 16,000 in 2021.

Some 17,000 Delta employees took buyout packages and 40,000 volunteered for temporary leaves of absence. So far this year, it has added 8,700 employees, some of them starting at lower pay rates compared with more experienced employees who opted for buyouts.

“We’re getting a nice juniority benefit as we bring in a whole new generation of employees at essentially every level of the company,” CEO Ed Bastian said Oct. 13 on a quarterly call. “We had close to 20,000 people retire a year ago, so the top end … many of our most experienced employees have chosen to retire, and that’s opened up opportunities for younger people.” Bastian said the company hasn’t changed its pay scales.

United Airlines, along with Delta, has been more conservative about bringing back flights than American and Southwest.

“After dramatically cutting our flight schedule at the start of the pandemic, we knew it would be challenging to bring flights all back at once, so we made the decision to gradually add flights over time,” United CEO Scott Kirby wrote in his testimony. “While this choice sacrificed short-term profits, it allowed us to ensure a reliable service and to largely avoid the widespread operational challenges experienced by other carriers.”

Sara Nelson, president of the Association of Flight Attendants, who worked closely with airline executives and lawmakers to get the payroll support approved, is also scheduled to testify in front of the committee. She called for increased protections for cabin crews that have faced a surge in unruly and at times violent passengers.

“The last thing we need, especially before the December holidays after dealing with all of the stresses on the frontlines of this pandemic for two years, is a false narrative about the [payroll support] program,” read her written testimony. “Unfounded controversy breeds contempt for aviation workers simply doing our jobs to keep everyone safe.”

Leslie Josephs  www.cnbc.com