Treasury Secretary Steven Mnuchin is negotiating the delivery of billions in financial assistance to Boeing, United Airlines and other large aviation companies to protect them from coronavirus fallout. Mnuchin should cancel this costly exercise in favoritism.

We’re not rooting for any company’s failure, nor for hardship to befall employees of any industry. Rather, we’re opposed to the idea of the federal government using portions of the $2 trillion coronavirus rescue package to support and protect major players in specific industries.

The entire country has been knocked on its heels temporarily by the pandemic. Millions of Americans have lost their jobs, been furloughed or taken pay cuts. Small business owners, notably restaurateurs, are suffering, and some will seek access individually to emergency loans. The retail, resort, sports, arts and energy industries are getting crushed. Again, who isn’t besides Amazon?

Yet Boeing and the airlines — and by extension, their shareholders — get singled out for dispensation? Hmm, now announcing the departure of free market principles from the airline industry.

The deals under consideration for two Chicago-based giants, Boeing and United, along with others, would offer up a mix of taxpayer grants, loans and loan guarantees to help the companies keep operating and make payrolls. President Donald Trump and members of Congress apparently want to attach conditions to the aid, including requirements that the companies hold off on layoffs and not use the money for share repurchases.

Another significant demand: giving the government an option to take an ownership position in exchange for the financial assistance.

If the Trump administration must go forward with bailouts, extracting ownership stakes so taxpayers might benefit from the economic recovery would make these unsavory transactions fairer. But wouldn’t you know it, Boeing and the airlines hate that idea. They’d much rather receive the money as a blank check, thank you very much.

Boeing, a government defense contractor and one of two global airplane manufacturers, is the country’s largest exporter. Air travel is critical to the economy. No question, the aviation industry is important. But if high status is an argument for government intervention, it is also a reason why these companies should be able to manage COVID-19 headwinds with their own bank loans and other sources of capital. We’re remembering back to the dark days of the 2008 financial crisis, when Warren Buffett stepped in to protect Goldman Sachs by investing $5 billion. Both sides benefited. That type of private transaction is available to Boeing, United and the others, assuming they are healthy enough to survive. If they aren’t, why should taxpayers save them?

Boeing CEO David Calhoun has addressed some of these issues in television interviews, but his responses have been contradictory. That has left the impression he wants to negotiate a favorable deal or would be willing, and able, to seek money elsewhere. “We’re a little better off than most people think,” he told CNBC last month. “If we need to pursue other options in private markets that are a little more unusual, we will. I don’t think we’ll get to that, but we’ll do what we have to do, and we’ll protect the long-term outlook for our shareholders.”

Indeed, this negotiation is about the shareholders. They should be rewarded for the risks they take investing in public companies, but they also should suffer the consequences for failures. Competition creates stronger companies that provide more valuable products and services to customers. Competition also weeds out the weak. Since airline deregulation in 1978, individual carriers have succeeded and failed, but the public overall has benefited from lower fares, more destinations and safer skies.

A government rescue destroys the competition proposition. In this case it potentially helps companies overcome mistakes that predate coronavirus. Boeing’s aircraft business already was struggling last year due to the disastrous development of the 737 Max jet, which has been grounded after two fatal accidents since 2018. The airline industry spent billions to pump up share prices through stock repurchases when it could have socked that money away for a rainy day.

We aren’t eager to see bankruptcies. But they may be inevitable because we don’t want Washington lawmakers using taxpayer dollars to pick private sector winners and losers. In today’s treacherous circumstances, Boeing, United and the others need to find their own ways forward.

Will Congress bend anyway? Probably. Capitol Hill operates on a system of clout and fear, and the airline industry can leverage both. If Congress and the administration swoop in as savior, they are absolving executives of past mistakes. They are telling them they are free to take more big risks and not fret about the consequences because they’ll be backstopped by the government.

Boeing, United and the airline industry should be forced to do what millions of entrepreneurs and mom-and-pop businesses are doing: adapting to a traumatic but necessary shutdown of the economy and figuring out how to survive — without a generous rescue from taxpayers.

Editorial by the Chicago Tribune

Visit the Chicago Tribune at
Distributed by Tribune Content Agency, LLC.

Only subscribers are eligible to post comments. Please subscribe or to participate in the conversation. Here’s why.

Use the form below to reset your password. When you've submitted your account email, we will send an email with a reset code.

filed under: