If I was Boeing, I would simply eat fewer avocados and make my coffee at home
To kill the Coronavirus, global air travel is cancelled. Now airlines across the world are in crisis, and begging for state bailouts
The mother of all rainy days
Growing up, my mother would say something to me that now, I think about a lot. It goes:
“Be careful who you stamp on on your way to the top - you see them all again on your way back down.”
Anyway, on a related note the airline industry is haemorrhaging cash. Airlines all over the world are looking for massive state-funded liquidity to survive the impact of an unexpected global health emergency. Every industry has taken a hefty shock - but airlines are feeling the Coronavirus crisis acutely. In a world where international borders all over the planet have been closed indefinitely, they don’t really have a product anymore. They could never have prepared for it. Which isn’t relevant, because they weren’t prepared for anything, of any description, anyway. Anyway some have already folded and the rest are clean out of cash in about 3 weeks.
Privatised profits built on socialised risk
When the world’s financial systems collapse in on themselves (a regular, nasty side effect of whatever cryptic video game the banks have managed to build), the taxpayer-funded bailout is a classic tool of neoliberal economics that rolls out the most generous socialist ideas at the top of the industrial food chain, and the hardest, most self-interested capitalist ones at the bottom. Because:
“The market will regulate itself.”
In short, what tends to happen is that incredibly troubled, fragile global enterprises agree to restructure their operations in some way that keeps them afloat. They do that in exchange for a veritable banquet of taxpayer money and Deloitte firing the most powerless 25% of the workforce to stop the cash bleed. The most obvious recent example was in 2008, when US banks overextended their mortgage products so severely that a chain of defaults (fine, that’s a simplification, I know) sent the entire global economy into a tailspin. When people who’d overextended themselves on multiple homes stopped paying, there was no money, anywhere in the system, and it became an instant financial emergency. Collectively, governments around the world used tax receipts to flood these same banks with cash in order to stop Western civilisation from falling apart. 2.6 million jobs still disappeared and it destroyed the global credit market, which is a cornerstone of how consumer spending works.
What those people really meant, I think, was:
“The market will always protect the rich at the expense of the working poor.”
The following 7 years was affectionately referred to as the ‘credit crunch’, by which a massive proportion of people (often, ones that had already been screwed) no longer qualified for any credit, blocking out a lot of people who otherwise should have qualified for mortgages. In a surprise to nobody, this wasn’t well received by anybody who wasn’t on the board of a very large financial institution, but it did somehow prevent a historic depression and a massive social revolution, and I think for the most part, that’s what they were trying to achieve. So, I guess, that’s …a thing.
But Boeing, maybe you should simply eat less avocado
But there’s a change afoot - because the generation of people that paid the heaviest price for the last round of bailouts have had to practice some fiscal responsibility of their own - to achieve even the smallest goals that the national aspiration leans towards. They’ve had to practice the sort of fiscal responsibility that doesn’t apply to massive corporate interests, run by a class of people that don’t worry about lower-middle, simple-simon shit like the price of heating their home, paying the mortgage on someone else’s property, keeping their children fed, or buying their own, small house. Millions of people are squeezed to the brink. They don’t have savings, because they either don’t earn enough to save, or, you know, in the richest countries on the planet, choose not to just eat chickpeas for 15 years so they can survive financial emergencies. There are plenty of financially irresponsible people in that group too - but I’d make a convincing argument that they’re not the majority.
This wider cultural narrative of financial culpability, one that is doled out by those who by fortune and consequence were often never in the pit to start, is a bitter, bitter pill. Largely because it’s an odd mixture of cruel and nonsensical. In the UK, in a climate where property prices have spectacularly outpaced wage growth unlike anything else in the economy, it’s been pretty simple for certain groups to consolidate their own wealth and use it to extract even more from a group of people that are spending sometimes quite literally 50% of their income on their rental arrangement. This class consciousness is growing, as this generation attempts to build families of their own. The working poor and the lower middle are restless at being told how to conduct themselves by a club that’s bleeding them dry, and it’s an international feeling - not just a British one.
As part of the collective psyche, the mainstream media has broken a few high profile stories in the recent past that have delivered weird, generalised advice like:
Millennials eat too much avocado toast - eating out less, and simpler foods, means you can save more money.
You shouldn’t spend £3 on a coffee from one of those chains, you can make it at home.
Drive a cheaper car. Your car loan is ruining your finances.
Go out less.
Maybe don’t have a smartphone. Who needs it?
Make sure to have 6 months of living costs in a savings account, in case an emergency strikes, so you’ve got time to pivot and rebuild.
Although the aggregate minimisation of those things definitely do contribute to saving, or a meaningful first home deposit, in the UK, that’s now, nearly £35,000. To qualify for the lifetime loan. In London, it’s £110,000. I guess they’re right. Nobody should spend their entire disposable income exclusively on between 17,500 and 55,000 avocados if they’re practicing financially literacy.
Legroom costs extra
I’m obviously drawing a simplistic parallel between the expected financial responsibility of lower middle consumers, and the spending behaviour of large global conglomerates. But that’s for a reason. Both of these groups are run by people. And they are groups who suffer completely different pressures, stressors and motivations. When we talk about ‘bailing out businesses’ we aren’t talking about businesses, at all. What, a ‘business’ just woke up and incorporated and shat out five hundred Boeing 747s, did it? There were no people involved? It’s not owned by any people, at all? Was it a random pile of paper in an accountant’s office that said:
Yeah… it costs extra, to pick your seat.
Legroom? That costs extra.
It costs extra to get through security quicker.
You misspelled your name on the booking? We’ll fix it, but it costs extra.
If you want a bag in the cabin, it needs to be the size of a Sega Mega Drive… or …costs extra.
Oh, checked bags? Costs extra.
Food and drink? Costs extra.
It doesn’t feel good. It’s not a good look. It’s a microcosm of a macro-level issue - that everything has a price, including your basic comfort. It’s shady, opaque nonsense held up by an industry that is already famous for its own financial irresponsibility.
Which introduces a greater issue, too. Airlines are a mess, especially in the US. They’re bankrupted all the time, and when the economy tanks, they’re usually the first to crack. In the US, they’ve spent the last decade and $13 billion on stock buybacks, which effectively just serve to artificially inflate their share value. And even though they’ve been bailed out repeatedly, their cash just gets washed and pumped out to the c-suite and the senior teams in a way that doesn’t make any sense if you understand basic arithmetic. When they fire their executives, they pay them tens of millions of dollars, despite being known for having regular liquidity issues. This is because they’re critical infrastructure at this point - and they’re too big to fail. There will always be money ‘in the future’ - access to juicy credit lines based on money that hasn’t been earned yet, because the consequences of the failure of a major airline is too enormous to fathom. This confidence is a license. It’s one rule for the way that business conducts itself, and another for their customers - which makes no sense when customers end up footing the bill for the broken rules eventually anyway.
And now, COVID-19 has ripped an unceremonious fart in the quiet of the gentleman’s club. They’ve been stamping on people on the way up, and are about to start meeting them on the way down.
So what are the options?
To be honest, there aren’t many, and it’s likely that governments all over the world are going to take advantage of some combination of all of them. They go like this:
Nationalise them. (Seriously. Italy already did this, with Alitalia.)
Pay to bail them out, through either massive grants, loans, or both. (Politically, an incredibly difficult sell, and long-term, not wise either.)
Gigantic loans with a bunch of strings attached - forced to keep all staff on, a stock buyback ban, you name it.
Let them fail. (Morally and economically, probably the right lesson - but comes at a massive human cost. Collapsing airlines take many tens of thousands of direct and supply-chain jobs with it, and those people, well, it’s not their god-damned fault, is it? They can’t even get a damn avocado from these bastards.)
It’s a bunch of bad choices, built on a shitty set of circumstances, all of which will have crappy outcomes for working people. Thousands have already been laid off. But these businesses shouldn’t be bailed out with no strings. Not anymore. The maths has always been wrong. The concept has always been screwed. It’s not fair, and we all have our reckoning.
So I suppose, maybe they should be nationalised. Yeah, I guess nationalisation could work. For the airline, it’s like a bailout. But it costs extra.