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How We Can Save Aviation Without Enriching Airline CEOs

The next economic calamity of the Trump regime’s Year Four? That will come October 1 when the federal coronavirus aid deal brokered last March for the airline industry expires.

That deal poured $25 billion in emergency grants to the nation’s hard-hit airlines. In return, the airlines agreed not to lay off any workers before October 1.

At the time, that deal seemed to make sense to most everyone involved. By October 1, most industry players assumed, the pandemic would be fading. Airline travel would be building back nicely.

That, of course, hasn’t happened. The pandemic still rages, and air traffic remains deeply depressed. American is expecting its flights to be down by over half in 2020’s final quarter. Other airlines are reporting similar stats, and airline execs have begun announcing major layoffs come October 1.

United now sees its total workforce dropping 36,000 slots lower this fall, American 40,000. Flight attendants, pilots, and gate agents are all facing the ax, as are many thousands of other workers at airports likely to heavily curtail their operations.

Airline execs are making no secret of the job hemorrhaging ahead. The prospect of massive job losses, they figure, will force lawmakers and the White House to pump in more federal aid dollars.

That expectation makes historic sense. America’s airline industry has always been able to count on federal subsidies of one sort or another. In the 1920s, the nation’s fledgling airlines depended on lucrative federal air-mail contracts. By 1999, a congressional report that year calculated, the federal government had “spent $155 billion in direct support of aviation.” Still more subsidies would flow after 9/11 — and continue even after the industry returned to profitability.

Americans, by and large, didn’t see this federal support for aviation as terribly problematic. They saw the airlines as providing an essential public service that we could not afford to let go under.

But the airline industry has also always provided an opportunity for enormous private profit, and the resulting tension between public need and private gain has been with us right from the airline industry’s earliest days. During the Great Depression, lawmakers like Senator Hugo Black from Alabama — later a distinguished U.S. Supreme Court justice — bristled at the excessive pay airline execs were making.

Congress, the senator felt, couldn’t directly set executive pay at the airlines. But Congress could impose pay limits indirectly — by leveraging the power of the public purse. The airlines, Black noted, were routinely pocketing federal tax dollars through loans and government contracts. These dollars were helping bankroll the lavish rewards for airline execs. Taxpayers, Black believed, should not be subsidizing this excess, and, in 1933, the senator finally broke through. He maneuvered into law legislation that denied federal air-mail contracts to airlines that paid their execs over $17,500, the equivalent of about $350,000 today.

Hugo Black’s spirit resurfaced in this past spring’s debate over pandemic emergency assistance. In the House, Democrats fashioned legislation that would have capped CEO pay at all major enterprises collecting corona aid. These companies would have had to limit their top executive pay to no more than 50 times their median worker pay — or go without federal aid. But this pay-ratio provision never made it into the legislation the House and Senate would agree to pass. The CARES Act eventually enacted into law would limit CEO pay only at companies deemed “critical” to national security — like airlines — and these limits would be exceedingly generous.

Airline execs who made over $3 million in 2019 could, under the aid deal, receive $3 million in 2020, plus 50 percent of any compensation received in 2019 that exceeded $3 million. Delta CEO Edward Bastian collected $17.3 million in 2019. In 2020, under the CARES Act, he could receive over $10 million.

In effect, the CARES Act places top airline execs in a compensation “holding pattern.” They can continue to take in hefty rewards — albeit somewhat reduced from “normal” — until we beat the virus and their planes can once again take flight with passengers stuffed like sardines into tiny seating spaces.

But our tax dollars should not be keeping airline execs in a comfortable “holding pattern.” And our tax dollars should not be providing a launching pad for a return to the lavish CEO pay levels of our pre-corona past. We need, to borrow a phrase, to build back better.

So argued dozens of national public interest groups this past April in a petition that went to top congressional leaders. Advocacy organizations that ranged from the NAACP and Oxfam to the Service Employees union and Public Citizen called on lawmakers to “apply strong conditions on current and future Covid-19 aid laws to prevent personal profiteering by senior executives of recipient corporations.”

The petition acknowledged that America’s top corporate execs bear no direct responsibility for the pandemic itself. But many of those execs, the groups charged, have “contributed to the economic insecurity” that has “left so many Americans vulnerable to economic ruin.”

“Crisis relief,” the petition continued, “must be targeted to those who need it most — not corporate executives who have amassed enormous fortunes.”

Congress, the groups urged, should “strengthen the executive compensation requirements in the CARES Act and attach these same restrictions to all future crisis-related corporate aid, as well as federal government contracts for economic recovery projects.”

And how best to do that? For starters, by capping executive pay at “no more than 50 times that of the median paid worker” at each aided firm.

That standard would have a definite impact if applied to the renewed aid the airline industry is now seeking. In 2019, Delta’s CEO took down 147 times the pay of typical Delta employees, United’s CEO 169 times the pay of his typical workers, and American’s CEO 189 times his company’s median pay.

A 50-to-1 ratio restriction, advocates point out, would do double duty. Such a restriction would help prevent taxpayer subsidies from pumping up executive pay and give top execs a powerful personal incentive to narrow their internal pay divides and lift up worker pay.

The basic message to airline execs in all this: We want your planes to soar, not your paychecks.

Sam Pizzigati writes on inequality for the Institute for Policy Studies. His latest book: The Case for a Maximum Wage (Polity). Among his other books on maldistributed income and wealth: The Rich Don’t Always Win: The Forgotten Triumph over Plutocracy that Created the American Middle Class, 1900-1970  (Seven Stories Press). 

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