Elaine Thompson/AP Photo
A masked worker walks in view of a 737 jet at a Boeing manufacturing plant, April 29, 2020, in Renton, Washington.
When the original CARES Act was passed, it included $17 billion in relief for Boeing and $25 billion for the airlines. Thanks to tough bargaining by unions and heroic work by progressive members of Congress—special shout-out to Rep. Peter DeFazio—both provisions limited the ability of these corporations to lay off workers.
Then in early May, Boeing told the government to keep its money. Thanks to Federal Reserve guarantees (with no public-interest conditions), Boeing could sell bonds. It borrowed $25 billion in money markets. It had offers of up to $70 billion, and desisted only because all that additional debt would have destroyed its balance sheet and relegated its bonds to junk status.
This turnabout blew up the labor guarantees, but thanks to pre-existing labor contracts with anti-layoff protections, there have not been mass layoffs at Boeing—yet. But these are coming, because the market for aircraft sales has collapsed. Boeing has itself to blame for its longer-term problems—years of stock buybacks instead of investing money in modern medium-range planes, resulting in the 737 MAX fiasco.
The bigger scandal is the airlines. Unlike Boeing, all the major carriers took the government’s money.
The CARES Act explicitly provided that the airlines must “refrain from conducting involuntary furloughs or reducing pay rates and benefits” until September 30. But led by United, the big airlines have sought to get around the anti-layoff provisions by reducing hours and putting workers on part-time, which also affects their benefits.
United has backed off somewhat, thanks to a lawsuit filed by the International Association of Machinists, which represents mechanics, baggage handlers, and ground crews.
Don’t count on the Trump administration to enforce the law. At a Senate oversight hearing May 19, Treasury Secretary Steve Mnuchin said he believed United was “now in compliance” but ducked a question on whether the airline has been out of compliance. But other airlines are moving forward with plans to reduce hours and lay off workers.
Both industries—airlines and aircraft—face a very uncertain future. For now, an airplane is a flying Petri dish and most people are avoiding air travel. Boeing, already in deep trouble from the 737 MAX fiasco, has few customers other than the Pentagon.
After the pandemic passes, these vital industries may need more government aid, and more government direction. But for now, the airlines took public money with strict limits on layoffs, and they need to keep their end of the bargain.
