New Report Urges Conditions For Airlines Subsidies

LOS ANGELES – A new study released today by three California groups finds that conditions for passengers and workers have eroded while airlines have received nearly $8.5 billion in taxpayer subsidies since 2001.

“Shortchanged: How Airlines Can Repay Taxpayers for Billions in Subsides by Improving Jobs, Security and Services” shows that the airline industry has benefited from enormous taxpayer support yet has failed to provide a fair return on the public’s investment, creating poor quality jobs and providing inadequate security and services for passengers. The study concludes that despite the industry’s current financial crisis, it is essential that major subsidy recipients such as American, United and Delta along with other airlines take measures to address these issues – both to improve safety, service and job standards as well as to ensure the long-term health of the airline industry.

“Taxpayers have invested billions in the airline industry but we’re getting shortchanged because airlines are not providing good jobs for workers or good service to passengers,” said Carolina Briones, Research Director for Los Angeles Alliance for a New Economy and lead author of the report, which was co-released by the East Bay Alliance for a Sustainable Economy (EBASE) and Working Partnerships USA. “It’s true that the airlines are facing financial challenges right now, but they must do more to improve jobs and ensure a high level of passenger safety and service.”

In addition to the estimated $8 billion received in federal assistance since 2001, the airlines have also benefited from an estimated $487 million in state and local subsidies in California alone, including tax exemptions and low-interest bond financing. The most direct subsidy to the airlines after the 9/11 attacks came in the form of cash grants totaling $4.6 billion, issued with virtually no strings attached. The largest single grant went to United Airlines ($774 million), with American and Delta following closely behind with $694 million and $636 million, respectively.

“Our state is facing a major budget crisis, and tax exemptions for the airlines here in California are estimated to cost more than $800 million over a 5-year period at the state and local level,” said California Assemblymember Lloyd Levine. “If airlines expect continued taxpayer support, they must do more to improve jobs and services to passengers.”

“Shortchanged” urges the airline industry to provide a fair return on the public’s investment by providing middle-class jobs and ensuring quality service and passenger safety. According to MIT Professor Thomas Kochan’s research on the industry, improving employee compensation and labor relations will ultimately lead to greater airline productivity and profitability.

“By pointing out the range of public resources supporting the airline industry, “Shortchanged” makes it clear that the public has a right to demand that its resources be used not to subsidize substandard and potentially risky employment strategies but to build the workforce quality and fair working conditions needed to meet the public’s expectations for safe, reliable and efficient service,” said Kochan, a professor of management at MIT’s Sloan School of Management. “I hope this report serves as a wake-up call both to the public and to government policymakers. It is time to get on with the job of rebuilding our airline industry in ways that work for all who have a stake in it.”

“Shortchanged” shows that despite receiving billions in taxpayer subsides, the airline industry has failed to invest in its workforce or provide quality service and security to passengers. Traditionally, the airline industry has offered middle-class jobs that enable workers to provide for their families, receive health care when they need it, and retire in dignity. However, during the last few years, the airlines have severely eroded wages and benefits by outsourcing critical duties and cutting compensation for in-house employees.

Airline cost-cutting and contracting out of critical duties without adequate standards have, in turn, jeopardized security and passenger safety. These are workers who check airplanes for suspicious or dangerous items, assist passengers with disabilities and the elderly, transport baggage and clean the airplane cabins. The 2008 Airline Quality Rating report gave the industry its lowest scores since rating began nearly two decades ago.

“We are often short-staffed on certain flights,” said Carolina Franco, a wheelchair agent at Los Angeles International Airport (LAX). “We’ve been told that’s because the airline’s not paying for full staffing. Short-staffing means that if we have a passenger with rolling luggage, we end up pushing the wheelchair with one hand, and pulling the bag with the other. This makes it hard to control the wheelchair and is dangerous for the passengers and us.”

A 2007 survey of airline-contracted workers at LAX showed that airlines were not providing adequate services to the elderly and to passengers with disabilities because of equipment problems, lack of training and understaffing. Workers reported that public health was threatened by inadequate cleaning of airplane cabins.

The report also urges federal, state and local officials to take action to raise standards for job quality, security and service quality in this industry. Noting that few strings have been attached to the billions received by airlines in taxpayer subsidies, the study recommends that government programs which provide subsidies to businesses should contain public benefit requirements ensuring job and service quality.