With an election looming, so are threats of a significant transportation slowdown if Congress doesn’t act before it goes out of session.
Several airlines are threatening to lay off tens of thousands of workers if they don’t get more stimulus funding. Highway projects could grind to a halt if Congress doesn’t reauthorize a supplemental bill to the Highway Trust Fund. Public transportation agencies are threatening layoffs and cuts.
In a late July press conference, Washington Metropolitan Area Transit Authority CEO Paul Wiedefeld said, “The scale of the financial crisis we are facing is enormous.”
“Unfortunately, the CARES Act funds to Metro will dry up later this year, at the same time our fare revenues are projected to continue to be down approximately 90%, and our local and state funding sources continue to face financial crises of their own,” the Metro chief said at the time.
“The board will receive a briefing on the situation next Thursday and will likely have to consider some extremely harsh measures if federal dollars aren’t there as a bridge,” Metro spokeswoman Sherry Ly told the Washington Examiner.
Yet the overall picture may be more complicated and less dire than some recent headlines have painted it.
“A lapse in highway bill funding would shake up project planning,” admitted David Ditch, an analyst for the conservative Heritage Foundation who specializes in budget and transportation.
“However, given that the House and Senate are miles apart on reauthorization, it appears that both sides are going to go with the ‘easy way out’ of a one-year extension. The odds that highway funding would lapse during an election year are extremely low,” he said.
For many airlines, the medium-term outlook is bad. Industry analysts are not predicting a return to pre-coronavirus levels of flight for several years. Both American and United have warned workers that tens of thousands of them are potentially on the furlough block when the “no layoffs” provision of stimulus funding expires at the end of September. United Airlines recently announced that it would furlough 16,000 employees on Oct. 1 if Congress does not provide necessary relief.
But Gary Leff, author of the influential View From the Wing website, says things could worsen.
“U.S. airlines are in very little trouble without additional government support this year. All of the major U.S. airlines have strong cash positions and aren’t at risk of bankruptcy this year,” Leff told the Washington Examiner.
He added that even “bankruptcy isn’t a risk to the transportation system or safety,” noting that “United, American, and Delta have all successfully flown through bankruptcy before.”
As with public transportation, the real problem for air travel is a demand problem.
“All of the airlines expect their business to lag into the future. Airline trade association IATA says flying won’t fully return to 2019 levels until 2024,” Leff said.
That means, practically, that “another round of payroll support just means pushing layoffs out to April, after the election. And a straight extension of CARES Act payroll support comes at a cost of about $333,333 per job saved over the course of six months.”
The threats of airline layoffs also highlight significant changes within the industry. In terms of seats available to fly on any given week, the big three airlines ceded the No. 1 spot to the traditional No. 4 airline, Southwest.
Southwest CEO Gary Kelly assured employees in a July letter, “We will not furlough or layoff any Southwest employees on October 1, unlike our major competitors” and that the airline has “no intentions of seeking furloughs, layoffs, pay rate cuts, or benefits cuts through at least the end of this year.”
Also, things appear to be right on track for private rail.
“Class I freight railroads have not sought or received direct federal stimulus money to date,” Association of American Railroads spokesman Ted Greener told the Washington Examiner. “That remains the case, as the industry continues to weather the economic fluctuations by tapping its own liquidity and finding cost savings where they exist.”
