Welfare for the Airlines?

Should our tax dollars be used to provide corporate welfare to the airlines? If so, should the sum of that welfare exceed the revenue lost during the three days that they were not allowed to fly? Should we also compensate them for the now reduced demand for their services? If so, should we not also provide welfare for travel agencies, hotels, amusement parks, casinos, flight training schools, and other businesses that have been negatively affected?

Are Interstate Highways and their ongoing improvements welfare for trucking companies? Apologies for answering a question with a question. You could say that trucking companies pay taxes but airlines do as well. I would guess that the money paid in taxes by trucking companies is much less than the cost of providing safe and in most cases well maintained highways. The US economy is not a pure capatilist economy. It is a "mixed" economy. The government has a role in the economy to provide for services and facilities that the private enterprise can't provide for themselves. Is the airline industry vital to our economy? I would think so. I haven't studied the bail out package but I think it's important to realize that government does play a key role in keeping our economy functioning.

"Are Interstate Highways and their ongoing improvements welfare for trucking companies?"


It's not analogous, since we all use the highways and the government is not giving money directly to trucking companies. Airlines have similarly benefited from taxpayer money spent on airports.


"The government has a role in the economy to provide for services and facilities that the private enterprise can't provide for themselves."


True, such as protection from terrorist attack. However, the federal government has gone far beyond providing essential services that private enterprise is unable to provide.


"Is the airline industry vital to our economy? I would think so."


Are you suggesting that the industry would cease to exist if they don't receive welfare? Why can't they respond to changing market conditions like other businesses by down-scaling, cost-cutting, merging, increasing efficiency, raising prices, etc? Free market economies usually find a way to fulfill vital needs.

>>It's not analogous, since we all use the highways and the government is not giving money directly to trucking companies. Airlines have similarly benefited from taxpayer money spent on airports. >True, such as protection from terrorist attack. However, the federal government has gone far beyond providing essential services that private enterprise is unable to provide. >Are you suggesting that the industry would cease to exist if they don't receive welfare? >Why can't they respond to changing market conditions like other businesses by down-scaling, cost-cutting, merging, increasing efficiency, raising prices, etc? <<


I would hardly characterize terrorist attacks as "changing market conditions."


"Free market economies usually find a way to fulfill vital needs."


Again we don't have a purely free market economy. We have a mixed economy. The government has a role in the economy to provide for services and facilities that the private enterprise can't provide for themselves. I think it's important to realize that government does play a key role in keeping our economy functioning.

"It's not analagous ... snipped ... Michael's rebuttal "


Yes it analagous.


Michael said that airlines should have to adapt to changing market conditions like any other private business. I wrote that terrorist attacks could hardly be characterized as changing market conditions. I'm thinking of changing market conditions in the traditional sense.


"Free market economies usually find a way to fulfill vital needs."


Again we don't have a purely free market economy. We have a mixed economy (mix of free markets and planning). The government has a role in the economy to provide for services and facilities that the private enterprise can't provide for themselves. I think it's important to realize that government does play a key role in keeping our economy functioning.

"Yes it analagous."


No it not. [img]/images/smile.gif[/img] [see my previous post]


"terrorist attacks could hardly be characterized as changing market conditions"


As I pointed out, many businesses have experienced reduced demand (i.e., changed market conditions) following the attacks. Should we put them all on the welfare roles?


Terrorist hijackings are part of the risk assumed by the airline industry. However, I would not as strongly object to donating a small amount of my tax money to compensate for their lost revenues for the three-day period that airports were closed(assuming this is not covered by their insurance).


"we don't have a purely free market economy. We have a mixed economy (mix of free markets and planning)."


This is certainly true. Perhaps we would not be in a recession if our economy had more freedom and less "planning" (i.e., socialism).

NY Times article on bailout link:


http://www.nytimes.com/2001/09/21/business/21LINE.html


I'm not sure what portion of this legislation that your calling welfare. I assume it's the 5 billion in cash that they are getting to offset the costs of the government mandated shutdown and subsequent lost business. First of all understand that even though Reagan "de-regulated" this industry it is still highly regulated. I refer you to the following passage from the article:


"The industry's frailty has made investors increasingly jittery, with some airline stocks shedding as much as 65 percent of their value this week. Recognizing the vital role air transportation plays in the economy, lawmakers say they want to help airlines stay afloat, without turning the assistance into a bailout that goes beyond the scope of last week's disaster."


Understand that this aid won't come close to compensating the airlines for all of the lost business and I'm not saying it should. It's simply an attempt to head off more serious problems down the road. Basically our economy needs the air transportation industry to function well. The administration and Congress recognize this fact. Another excerpt from the article:


"Since the attacks, airlines and the Boeing Company (news/quote), the leading aircraft builder, have announced layoffs of almost 100,000, and industry officials have said that at least three carriers might face bankruptcy if the help was not forthcoming."


The layoffs are happening even with the bailout package so expect the airlines business to have a significant downturn (thus significant losses) even with the $5 billion in cash compensation.

"I'm not sure what portion of this legislation that your calling welfare. I assume it's the 5 billion in cash that they are getting to offset the costs of the government mandated shutdown and subsequent lost business."


It was the compensation for "subsequent lost business." However, I believe the 5 billion number is much less than what was initially discussed.


"industry officials have said that at least three carriers might face bankruptcy if the help was not forthcoming."


If this occurred, I would expect the remaining carriers to seize the opportunity fill in any gaps in vitally needed air service.


Regards,


Mike

To the extent that the airlines are really near total shutdown, I believe that the government has to bail them out...but no further. The airlines are a key part of our economy and cannot be allowed to fail enmasse.


Having said that, though, I'd like to make another point...namely that this country has just learned that it has little redundancy for transporting people. I believe this is a serious flaw and one that has already bitten us in the ass.


Notice that when people were stranded by the shut down of the airlines they mostly resorted to renting cars one way (at least most of the stories I heard involved that sort of activity). This is because we have almost no transportation infrastructure that does not rely on the airlines or the personal vehicle.


Amtrak serves a (relatively) few cities with a small number of trains of fairly limited capacity. Greyhound/Trailways serve a few more communities. Neither has the coverage that it had even as recently as the 1960's. It is virtually impossible to move around the country (except to major cities, or those that happen to be on the major routes between major cities) without flying or driving a personal vehicle.


As a contrast, does anyone doubt that an airline shutdown would not have been quite as catastrophic had it occurred in Europe? There are trains or busses available to even the smallest of cities on a regular basis.


It doesn't have to be this way, but without a major investment (which I don't see happening in the present circumstances) nothing is going to change.


Chuck

"The airlines are a key part of our economy and cannot be allowed to fail enmasse."


I can not see the vital need of airlines to me. Can someone give some better reasons why I should pay tax dollars to support them? I travel 120K miles a year but have never felt the need to fly.